Oil notched its biggest weekly loss since the depths of the last price crash, as record Saudi output, pressure from US President Donald Trump and a global stock sell-off intensified crude's freefall.
Futures slid below US$60 ($88.56) in London on Friday (US time) and ended the week down about 12 per cent, the worst showing since January 2016. Traders focused on the growing risks of a new glut of crude after Saudi Arabia's oil minister said Thursday that production from the world's largest exporter had climbed further this month.
Oil joined a swoon in equity markets nervous about international trade and a weakening economy. The S&P 500 Index fell to its lowest mark since May while European markets lost ground after a report showing a slowdown in Germany. Energy companies led declines, with shale drillers Concho Resources and Devon Energy each down more than 5 per cent.
"Crude's getting shellacked," said Kyle Cooper, director of research at energy consultant IAF Advisors in Houston. "The equities are giving a foreboding sign for overall economic growth. I think that's what's disturbing people."
In the US, West Texas Intermediate oil prices slid toward US$50 a barrel, the baseline at which many large shale explorers set their budget this year, RBC Capital Markets analyst Scott Hanold said in a note to clients. Smaller producers planned on even more, predicating budgets on WTI prices 10 to 15 per cent higher, he wrote.
"Outside of a few better-positioned companies, demonstrating free cash flow will be challenging at current oil prices," Hanold said.
The Saudis have signaled they will throttle back on production in December. But unless OPEC and Russia can reach a new deal to constrain output in Vienna next month, analysts see the prospect of sustained oversupply in 2019, undoing the group's success over the last two years to drain global inventories.
Trump, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman will attend next week's G20 meeting in Buenos Aires. The Russian and Saudi energy ministers are also scheduled to travel to Argentina's capital, according to people familiar with their plans.
Crude collapsed into a bear market this month after the US allowed some nations to continue buying Iranian supply. Trade tension between America and China is raising concerns over demand and Trump renewed a call for lower oil prices. Those factors pushed up oil's volatility this week to the highest since early 2016.
"We continue to see fundamentals improving in the near-term, but caution traders against sticking their necks out until the momentum shock finds a more solid floor," TD Securities analysts led by Bart Melek wrote in a note to clients.
Oil briefly eased off on some of its losses after the Wall Street Journal reported the Saudis and the rest of OPEC were negotiating a compromise that would cut output while still placating Trump.
Nonetheless, Brent for January settlement fell 6.1 per cent to US$58.80 a barrel at the close of trading on London's ICE Futures Europe exchange. The global benchmark traded at a US$8.38 premium to WTI.
West Texas Intermediate for January delivery lost 7.7 per cent from Wednesday's close to reach US$50.42 a barrel on the New York Mercantile Exchange. There was no settlement Thursday due to the US Thanksgiving holiday.