The crude oil crash just got worse.
US oil prices plummeted nearly 7% on Tuesday to $53.43 a barrel. That marks the cheapest closing price since late October 2017.
“In times of crises, all assets correlate,” said Matt Smith, director of commodity research at ClipperData. “Crude has gotten caught up in the flight from equities.”
In the span of just seven weeks, crude has gone from spiking to nosediving into a bear market. Fears of a new supply glut and weakening demand have wiped out 30% of its value since hitting a four-year high of $76 a barrel in early October.
Crude has sold off by about 7% twice in the past week. The November 13 decline of 7.1% was the worst in three years.
Beyond the stock market tumble, energy analysts saw few new reasons for the energy plunge.
“Oil traders are overwhelmed by bearish news,” said Clay Seigle, managing director of oil at Genscape. “The broad selloff in equities has traders concerned about the possibility of an economic slowdown, which could reduce demand for oil products.”
One new development may have also helped weigh on oil prices. President Donald Trump signaled on Tuesday he won’t punish Saudi Crown Prince Mohammed bin Salman for the death of Washington Post journalist Jamal Khashoggi.
“It could very well be that the Crown Prince had knowledge of this tragic event – maybe he did and maybe he didn’t!” Trump said in a statement.
Energy traders may be interpreting the White House comments on US-Saudi ties as a sign that the kingdom won’t aggressively cut oil production to support the market. Trump has repeatedly urged Saudi Arabia and OPEC not to do anything that will lift prices.
“If we broke with them I think your oil prices would go through the roof,” Trump told reporters at the White House Tuesday.
He also said he was “not going to destroy the economy of our country” over the murder of Saudi journalist and Washington Post contributor Jamal Khashoggi.
OPEC is scheduled to meet next month in Vienna to weigh a potential output shift.
“You’ve got to think OPEC will be looking to make a sizable cut to try to reign in supplies and find a floor for prices here,” said ClipperData’s Smith.
Not long ago, OPEC was under pressure to ramp up output in a bid to avoid $100 oil. Traders feared a supply shortage caused by the Trump administration’s sanctions on Iran, the world’s fifth biggest oil producer.
However, the Trump administration took a softer approach on Iran than it initially signaled. Temporary waivers were granted to China, India and other buyers.
By that point, Saudi Arabia, Russia and the United States had already ramped up output, leaving the market with a potential glut. US production has been especially strong, driven by the shale boom in the Permian Basin of West Texas. US output alone is expected to spike by 2.1 million barrels per day in 2018.
At the same time, the global growth worries spooking Wall Street threatens to eat into demand. The International Energy Agency warned last week of “relatively weak” demand for oil in Europe and advanced Asian countries as well as a “slowdown” in India, Brazil and Argentina.
“The outlook for the global economy has deteriorated,” the IEA wrote.