Oil prices fell on Tuesday as the market grew more concerned about a slowing global economy and rising US production as well as smaller-than-expected cuts by OPEC and its allies.  Encana photo.

Oil prices down about 2 per cent

Oil prices slipped about 2 per cent on Tuesday on mounting concerns that a slowing global economy will cut crude demand at a time when US oil output is climbing to record-highs and cuts by OPEC and its allies are smaller-than-expected.

Global growth forecasts issued by the International Monetary Fund show the slowdown in China is spreading, pulling down oil prices.  The IMF has trimmed its 2019 global growth forecast to 3.5 per cent from October’s prediction of 3.7 per cent.

By 4:37 p.m., EST, benchmark Brent futures fell $1.31 to $61.43/barrel and US West Texas Intermediate dropped $1.09 to $52.95/barrel.

In November, Saudi Arabia’s crude exports climbed to 8.2 million barrels per day (b/d), up from 7.7 million b/d in October, according to data from the kingdom.  Also, production in Saudi Arabia rose to 11.1 million b/d.

Data from the US Energy Information Administration shows US crude production hit a record high of 11.9 million b/d.

“They weren’t expecting that (nearly 12 million b/d production record) for a few months,” Tariq Zahir, managing member at Tyche Capital told Reuters. “We saw a very large drop in (U.S. oil drilling) rigs on Friday, but it comes down to whether Saudi Arabia is really going to do these cuts.”

Analysts are also concerned about the lack of adherence to production reduction pledges by participants in the OPEC supply cut agreement.

Russia’s Energy Minister Alexander Novak and his Saudi counterpart “might not see eye to eye” over the depth of production cuts, Robert Yawger, director of energy futures at Mizuho told Reuters.

“The Russians are not cutting with the same enthusiasm that the Saudis are,” added Yawger.

Despite volatile oil prices, Reuters reports that 70 per cent of senior energy industry executives are planning to increase or maintain capital spending in 2019, compared to 39 per cent in 2017.

“Our research shows that the sector appears confident in its ability to better cope with market instability and long-term lower oil and gas prices,” said Liv Howem, leader of DNV GL’s oil and gas division.