Oil prices tumbled about 7 percent on Tuesday, with US crude plunging to its lowest level in more than a year, caught in a broader Wall Street selloff that was fed by rising concerns about slowing global economic growth. US West Texas Intermediate (WTI) crude futures were down $3.90, or 6.8 percent, at $53.30 per barrel by 2:01 p.m. EST (1901 GMT). The contract fell as much as 7.7 percent earlier in the session to $52.77 a barrel, the lowest since October 2017.
So far in the session, more than 868,000 front-month WTI contracts had changed hands, exceeding the daily average over the last 10 months. Brent crude futures fell $4.50, or 6.7 percent, to $62.29 a barrel. The international benchmark fell as much as 7.6 percent to $61.71, the lowest level since December 2017.
Tuesday's drop extended a slide that has been largely unimpeded since early October. WTI prices have fallen more than 30 percent from their near-four-year peaks in early October, weighed down by surging supply and the selloff in risk assets worldwide. Brent has lost about 28 percent in the same period. "For the time being it's more about risk," said Jim Ritterbusch, president of Ritterbusch and Associates.
"When the stock market comes off 8 or 9 percent, it tends to conjure up images of a weak global economy and that feeds into expectations of weaker-than-expected oil demand." The S&P 500 index hit a three-week low on Tuesday as weak results and forecasts from big retailers fanned worries about holiday season sales, while tech stocks continued to slide on concerns about iPhone sales.
Global stock markets have suffered a shakeout in the past two months, pressured by worries of a peak in corporate earnings growth, rising borrowing costs, slowing global economic momentum and international trade tensions. Amid the uncertainty, financial traders have become wary of oil markets, seeing further downside risk to prices from the growth in US shale production as well as the deteriorating economic outlook.
Prices ticked lower after US President Donald Trump said the United States intends to remain a "steadfast partner" of Saudi Arabia even though "it could very well be" that Saudi Crown Prince Mohammed bin Salman had knowledge of the killing of journalist Jamal Khashoggi last month in Turkey.
Oil markets have been concerned about potential supply disruptions amid heightened tensions between the United States and Saudi Arabia over the killing. But experts said any threat to supplies were limited to begin with. "I never really understood the premium behind some kind of friction between US and Saudi Arabia from a policy standpoint ... It really is a too-big-to-fail relationship," said Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management in Washington.
"I think today what's driving oil is the continued equity selloff, and oil is really collateral damage." Meanwhile, the United States was considering adding Venezuela, one of its biggest crude suppliers, to Washington's list of state sponsors of terrorism but no final decision has been made, a person familiar with the deliberations said late on Monday.
Expectations for a ninth straight week of US crude inventory increases also weighed on prices. Analysts polled ahead of weekly data forecast crude stocks rose about 2.9 million barrels last week. Industry group the American Petroleum Institute is scheduled to release its data at 4:30 p.m. EST (2130 GMT), followed by government data on Wednesday morning.
US crude production has soared almost 25 percent this year, to a record 11.7 million barrels per day (bpd). The Organization of the Petroleum Exporting Countries is pushing for a supply cut of 1 million bpd to 1.4 million bpd when it meets on Dec. 6. The OPEC envoy for the United Arab Emirates said it was very likely that the group would reduce its output but the exact level had yet to be decided.
The International Energy Agency (IEA), however, warned OPEC and other producers of the "negative implications" of supply cuts, with many analysts fearing a spike in crude prices could erode consumption. "We are entering an unprecedented period of uncertainty in oil markets," IEA Executive Director Fatih Birol said on Monday.
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