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World oil prices tumbled Tuesday to their lowest levels in more than a year, hit by fears over the outlook for the global economy and doubts over producers’ resolve to cut output.
The plunge in oil prices came on a mixed day for global stocks, with European and Asian markets falling in the aftermath of Monday’s Wall Street rout.
US stocks mustered modest gains, but finished well below their session peaks as worries about a possible US government shutdown and a likely Federal Reserve rate hike weighed on sentiment.
‘The psychology of the market is very fragile,’ said Tom Cahill of Ventura Wealth Management, who said the budget sparring between congressional Democrats and US President Donald Trump added to the list of question marks.
Cahill was not cheered by the idea of a Fed pausing its course of rate increases.
‘If the Fed doesn’t hike rates, that would be concerning because it would mean the institution miscommunicated in a substantial way with the market,’ Cahill said.
‘It would be problematic for the future announcements by the Fed.’
Will OPEC actually cut?
Brent crude finished at $56.26 a barrel, a drop of over five percent on the day, while US benchmark WTI plummeted well over six percent to a $46.60 a barrel, its lowest level since August 2017.
Fears that Iran sanctions reimposed by Washington would cause a drastic drop in output, and a corresponding surge in prices, underpinned oil at the start of the quarter, said David Cheetham, chief market analyst at xtb.
‘But these concerns now look badly misplaced and it seems that a lot of people were caught on the wrong side in looking for $100 a barrel crude once more,’ he said.
There also are questions about the impact of a recently promised output cut by OPEC and other top producers including Russia.
‘OPEC may have come to an agreement with its allies to cut production next year and rebalance markets… but traders are clearly not convinced enough will be done,’ Oanda analyst Craig Erlam predicted.
Cheetham said reports saying Russia was pumping oil at record levels ‘raises concerns surrounding their intentions to follow through on their promises to cut output alongside OPEC members.’
US oil production data Wednesday could add more pressure if output is high.
Asian equities posted sharp losses earlier in the wake of Monday’s Wall Street selloff, while the British stock market remained beset with worries over the nature of the nation’s looming exit from the European Union next March.
Key figures around 2140 GMT
Oil – Brent Crude: DOWN $3.35 at $56.26 per barrel
Oil – West Texas Intermediate: DOWN $3.28 at $46.60 per barrel
New York – Dow: UP 0.4 percent at 23,675.64 (close)
New York – S&P 500: FLAT at 2,546.16 (close)
New York – Nasdaq:  UP 0.5 percent at 6,783.91 (close)
London – FTSE 100: DOWN 1.1 percent at 6,701.59 points (close)
Frankfurt – DAX 30: DOWN 0.3 percent at 10,740.89 (close)
Paris – CAC 40: DOWN 1.0 percent at 4,754.08 (close)
EURO STOXX 50: DOWN 0.8 percent at 3,040.13 (close)
Tokyo – Nikkei 225: DOWN 1.8 percent at 21,115.45 (close)
Hong Kong – Hang Seng: DOWN 1.1 percent at 25,814.25 (close)
Shanghai – Composite: DOWN 0.8 percent at 2,576.65 (close)
Euro/dollar: UP at $1.1365 from $1.1348
Dollar/yen: DOWN at 112.51 yen from 112.83 yen 
Pound/dollar: UP at $1.2641 from $1.2624 at 2200 GMT