Oil prices drop, Wall St slides

US crude approached US$47 a barrel as Saudi Arabia pared some of its production cuts. Photo / AP

Oil prices dropped, with US crude approaching US$47 a barrel, as Saudi Arabia pared some of its production cuts.

Saudi Arabia told OPEC it increased production in February, putting it above 10 million barrels a day but still below a production limit agreed upon between producers in an effort to stem the global glut.

Saudi Arabia increased production to 10.01 million barrels a day in February, up from 9.75 million barrels a day in the previous month, but below the 10.47 million barrels a day produced in December, according to OPEC's monthly report.

"Despite the supply adjustment, stocks have continued to rise, not just in the US, but also in Europe," OPEC noted." Nevertheless, prices have undoubtedly been provided a floor by the production accords."

"The speculative community is heavily stacked to the bullish side, buoyed by OPEC's renewed willingness to correct market oversupply and underpinned by early indications of historically high conformity," OPEC added.

Saudi Arabia placed extra crude into storage at domestic refineries and terminals rather than sending it to international markets, Bloomberg reported, citing a person familiar with policy.

Wall Street slid. In 1.26pm trading in New York, the Dow Jones Industrial Average fell 0.2 per cent, while the Nasdaq Composite Index declined 0.4 percent. In 1.12pm trading, the Standard & Poor's 500 Index retreated 0.5 per cent.

The Federal Open Market Committee began its two-day meeting and is widely expected to announce an interest rate increase on Wednesday. Investors will scrutinise clues on whether policy makers now see a steeper pace of rate hikes ahead.

"It's a foregone conclusion that the Fed will raise rates, but there is an expectation that the central bank may raise their expectation from three hikes this year to four," Michael Scanlon, portfolio manager at Manulife Asset Management in Boston, told Reuters.

In the Dow, slides in shares of Chevron and those of Caterpillar, down 1.6 per cent and 1 per cent respectively, outweighed gains in shares of Wal-Mart and those of Nike, up 1.6 per cent and 1.3 per cent respectively.

In Europe, the Stoxx 600 Index finished the day with 0.3 per cent decrease from the previous close.

Germany's DAX Index inched 0.01 per cent lower, while the UK's FTSE 100 Index slipped 0.1 per cent, and France's CAC 40 Index dropped 0.5 per cent.

In the Netherlands, the benchmark AEX Index shed 0.4 per cent a day before Dutch elections. Opinion polls were split, with two showing Prime Minister Mark Rutte's Liberals ahead of the anti-Islam, anti-European Union Freedom Party and the other showing the two parties tied, according to Bloomberg.

In fresh deal news, shares of Brazil's JBS rose, up 2.5 per cent in afternoon trading in Sao Paulo, after the world's top meat processor said it agreed to buy US-based Plumrose, which produces ham and bacon, for US$230 million.

The acquisition, a deal between JBS USA and Danish Crown, includes five prepared foods facilities located in Indiana, Iowa, Mississippi and Vermont and two distribution centres located in Indiana and Mississippi, JBS said in a securities filing.

"The acquisition of Plumrose is a continuation of JBS' strategy of expanding its portfolio of branded, high value added prepared foods, and strengthens its customer base and geographical distribution in the United States," JBS said.