West Texas crude yesterday set a record losing streak of 12 consecutive days, closing down by 7.1 per cent to $55.69 a barrel, its lowest since November previous year.
The price of benchmark Brent crude oil slipped below $70 earlier this week for the first time in more than a month amid fears of a new oversupply driven by record US production and milder than expected sanctions against crude producer Iran.
Since hitting a four-year high on October 3, crude oil has lost more than 25 percent of its value, putting it in a bear market. The IEA estimates total U.S. oil supply will rise by 2.1 million bpd this year and another 1.3 million bpd in 2019, from a current record of more than 11 million bpd.
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.
Saudi Energy Minister Khalid al-Falih said on Monday OPEC agreed there was a need to cut oil supply next year by around one million barrels per day from October levels to prevent oversupply. "It is not only manifested in the demand for OPEC oil as estimated by forecasters, but also in OECD stock levels", said PVM Oil Associates strategist Tamas Varga.
Oil has barely recovered from a record 12-day decline as investors fled a market battered by swelling supplies and a darkening demand outlook.
Traders said the benchmarks reversed earlier losses on signs China and the United States may be taking steps to de-escalate their bitter trade dispute.
The relative strength index (RSI) for both Brent and United States crude remained below 30, a technical level often regarded as signalling a market that has fallen too far.
The 14-member Opec expects oil supply from its rivals to outpace its own output next year. Russian Federation and Saudi Arabia are also pumping crude at record levels.
Most analysts expect U.S. output to climb above 12 million bpd in the first half of 2019.
The comments from the minister, Khalid al-Falih, show the balancing act the USA allies face in dealing with President Donald Trump's actions related to the oil industry.
On the supply side, a surge in USA production is contributing to rising stockpiles.
The International Energy Agency (IEA) and OPEC this week warned of a sizeable surplus at least in the first half of 2019, and possibly beyond, given the pace of growth in non-OPEC production and slower demand in heavy consumers such as China and India.