Futures closed down 4.8 per cent in New York,the steepest decline since May 31 and the biggest drop after an OPEC gathering since November 2014. Bank of England Governor Mark Carney warned of dangers from rising protectionism around the globe,citing a “widespread slowdown” that may require a major policy response. That added to worries following weak manufacturing reports from the US,China and Europe.
The anxieties blotted out optimism despite Tuesday’s agreement by major oil exporters to extend production cuts for nine months. Divisions remained over Saudi Arabia’s push to target even deeper reductions,with Russia expressing doubts at the end of a summit in Vienna.
“There are concerns that demand might slow to where it overpowers supply,” Bart Melek,head of commodity strategy at Toronto’s TD Securities,said in an interview. The “gloomy” data,especially from China,“is very much part and parcel of what we’re seeing.”
In another worrying sign,backwardation for Brent,a pattern in which the front-month contract is valued more than future months because of strong demand,was halved between Monday and Tuesday for near-term prices.
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West Texas Intermediate crude for August delivery slipped $US2.84 to settle at $US56.25 a barrel on the New York Mercantile Exchange. The slide accelerated as the contract crashed through several key technical trading levels,with WTI crossing below its 50-,100- and 200-day moving averages.
Brent for September settlement declined $US2.66 to $US62.40 a barrel on the ICE Futures Europe Exchange.
The drop in crude prices on Tuesday was an “anomaly,” OPEC Secretary-General Mohammad Barkindo told reporters in Vienna.