Oil prices have slumped to more than two-week lows as global stock markets fall, with investor sentiment made more bearish by a bigger-than-expected build in US crude inventories.
Brent crude futures fell $US2.83 overnight to settle at $US80.26 a barrel, a 3.41 per cent loss, after hitting a low of $US79.80, its weakest since September 24.
The global benchmark has retreated after hitting a four-year high of $US86.74 on October 3.
US West Texas Intermediate crude futures fell $US2.20 to settle at $US70.97 a barrel, a 3.01 per cent loss.
WTI hit its lowest since September 21.
US crude inventories rose six million barrels last week, the Energy Information Administration said, more than double analysts’ expectations of a 2.6 million-barrels increase.
‘The significant increase in crude oil inventories is a reflection of refineries going down for maintenance,’ said Andrew Lipow, president of Lipow Oil Associates.
Refinery crude runs fell by 352,000 barrels per day as utilisation rates dropped 1.6 percentage points, the EIA data showed.
Falling US equity markets and a global risk-off environment also weighed on crude futures.
On Wednesday, US stock markets tumbled, with the S&P 500 and the Dow Industrials indexes posting their worst day in eight months, as solid economic data reinforced expectations of multiple interest rate hikes over the next year.
‘The demand side of the oil equation is always much more difficult to discern than the more transparent supply side and as equities slide amidst rate increases, the oil market could begin to discount a worst case scenario with regard to oil demand expectations,’ Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
The Organisation of the Petroleum Exporting Countries cut its forecast of global demand growth for oil next year for a third straight month, citing headwinds facing the broader economy from trade disputes and volatile emerging markets.
OPEC sees the oil market as well supplied and is wary of creating a glut next year, the group’s secretary-general said on Thursday.
In the US Gulf of Mexico, producers had cut output by 40 per cent on Thursday due to Hurricane Michael, according to the Bureau of Safety and Environmental Enforcement, even as some operators began returning crews to offshore platforms.
The cuts represent 680,107 barrels per day of oil production, BSEE said, citing reports from 30 companies.
Michael crashed ashore Florida on Wednesday as the third most powerful hurricane ever to strike the US mainland.
It has since weakened to a tropical storm.