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Oil prices fall sharply as OPEC sees production outpacing demand

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Oil prices have fallen sharply to levels not seen for almost a year as traders see a return of a glut in supplies at a time of falling demand.

Energy stocks tumbled on Wall Street – threatening a wider stock market recovery on Tuesday – as a string of funds shed their long term oil positions, market participants reported.

Brent crude, the European benchmark, was trading just above $65 a barrel while US crude stood just below $56 – its lowest mark for 12 months.

It meant both were down by 7% on the day by 8pm in the UK.

It meant the market was on course for its worst session since December 2015.

Brent is in so-called ‘bear market’ territory alongside US crude as it has fallen by more than 20% since its peak – $86 in early October.

:: Oil bear market shows US shale has teeth

One analyst, Phil Flynn of Price Futures in Chicago, said of Tuesday’s sell-off: “It’s like a run on the bank.”

He told the Reuters news agency: “It’s getting to the point where it doesn’t seem to be about fundamentals anymore, but a total collapse in price.”

Forecasts for a slowing global economy have contributed to the weakening fundamentals in recent weeks.

Rising output in US shale oil has also taken its toll.

Prices fell further on Monday when Donald Trump urged the Organisation of the Petroleum Exporting Countries (OPEC) not to cut supply to prop up falling prices.

But OPEC followed that up with a monthly report on the state of the oil market showing another cut to its demand forecasts – the fourth in a row.

OPEC – led by Saudi Arabia – along with Russia have been burned by previous decisions to refuse production cuts.

They famously ruled out curbs, instead battling to maintain market share versus US shale, as Brent hit lows below $30 a barrel in early 2016 from highs of $110 two years earlier.

That decision ultimately hurt their economies significantly as revenues tumbled.

Riyadh indicated on Monday it was on course to ignore the US president’s wishes at OPEC’s next meeting due in December because it saw a need to reduce OPEC output by a collective one million barrels per day during 2019.

(c) Sky News 2018: Oil prices fall sharply as OPEC sees production outpacing demand