Oil prices fell over 3 per cent on Thursday as investors grew more concerned about rising global crude inventories and faltering economic growth.  Anadarko photo.

Oil prices down over 2 per cent

Oil prices fell over 3 per cent on Thursday, shedding some of Wednesday’s gains on indications of waning global economic growth and record high crude production.

By 3 p.m., EST, benchmark Brent crude futures dropped $1.60 to $53.16/barrel and US West Texas Intermediate crude futures fell $1.22 to $45/barrel.

On Wednesday, the US equities market gained and oil prices were up 8 per cent after the Trump administration tried to shore up investor confidence.  However, on Thursday, oil prices retreated alongside US stocks.

“In the absence of major oil specific headlines, the petroleum complex has become ‘attached to the hip’ of the equities amidst this week’s extreme price moves that have been developing in both directions,” Jim Ritterbusch, president of Ritterbusch and Associates, told Reuters.

Since the beginning of October, both Brent and WTI have dropped by one-third and are on track for declines of about 20 per cent in 2018.

The fall in oil prices has been fuelled by mounting concerns about slowing global economic growth and an oversupply of crude.

In October, market participants were concerned about a possible undersupply of crude with US sanctions looming on Iranian oil exports as well as rising seasonal demands in the northern hemisphere.

However, the Trump administration granted waivers to a number of Iran’s big customers and other producers compensated for the expected crude shortfall.  This resulted in rising global crude stocks and falling oil prices.

According to Reuters, Iran says its private exporters have “no problems” selling its oil, despite the US sanctions.

Earlier in December, OPEC along with Russia and other producers, agreed to cut their combined output by 1.2 million barrels per day (b/d), which amounts to over 1 per cent of the world’s oil consumption.

The agreement begins in January.  In the meantime, oil production in the US, Russia and Saudi Arabia has been at or near record highs.

On Thursday, Russia’s Energy Minister Alexander Novak said Moscow has agreed to cut its output by between 3 million and 5 million tonnes in the first six months of 2019.  Russia will then restore production to 556 million tonnes, or 11.12 million b/d, for the remainder of 2019.

The US Energy Information Administration will release data on US crude stocks on Friday.  Analysts participating in a Reuters survey forecast US crude inventories to drop 2.9 million barrels in the week to Dec. 21.