Oil prices tumbled more than 6 percent on Tuesday to eight-month lows as global producers and traders weighed the prospect of supplies overwhelming demand amid worries about a slowdown in economic growth. Prices fell further after Opec’s research arm again reduced its forecast for 2019 oil demand growth in another sign Saudi Arabia and its partners inside and outside the cartel might be forced to curb supplies to bring the market into balance.
“There is no doubt that production needs to be cut, as the oil market is oversupplied,” said Carsten Fritsch at Commerzbank. Opec said on Tuesday in its monthly market report that world oil demand was forecast to grow 1.29m barrels a day next year, about 70,000 b/d lower than last month’s forecast and down on the 1.45m b/d it forecast in July. Producers are anxious about a slowdown in the world economy amid trade tensions and emerging market countries’ currency weakness, which Opec said could “pressure” oil demand.
Brent crude has dropped more than $20 a barrel since rising above $86 a barrel in October. The international benchmark fell $4.18 a barrel to $65.98 on Tuesday, having hit an earlier low of $65.77 a barrel — the lowest level since March and the biggest one-day drop since July. US marker West Texas Intermediate dropped $3.72 to $56.18, its lowest level since December 2017. Khalid al-Falih, Saudi Arabia’s energy minister, said on Monday that Opec and its partners outside the cartel had conducted an analysis that showed that a 1m b/d drop in oil supplies from October levels was required to balance the market.
“We need to do whatever it takes,” said Mr Falih, signalling an impending reversal in oil policy. Opec and partners outside the cartel in June agreed to relax curbs in place since 2017 after pressure from US President Donald Trump. He called on Opec and its allies to increase production to offset any declines from Iran after the reimposed sanctions against Tehran.