Oil price takes a hit from global stock market plunge, rise in US inventories

Tokyo — Oil fell near the lowest level in two months as a rout in US stocks prompted investors to flee risk assets and as US crude inventories continued to rise.

Futures in New York dropped as much as 1.1% after a 0.6% gain on Wednesday. Asia’s main equity gauge entered a bear market after US stocks erased all of this year’s gains on Wednesday. While the stock-market rout spread to risk assets including oil and copper, safe-havens like gold gained. Meanwhile, a government report showed US crude stockpiles climbed more than expected for a fifth consecutive week.

Oil is poised for the worst monthly decline since July 2016 as ongoing trade tensions stoke concerns over global growth that drives energy demand at a time when US crude stockpiles are increasing. Traders are also closely watching how much Iranian oil will be removed from the market by US sanctions and whether the Opec and its allies can fill the gap.

“Sell-off in equity markets raised concerns over oil demand, contributing to a decline in prices,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. In addition, the gain in US crude inventories is adding to bearish sentiment, he added.

West Texas Intermediate for December delivery declined as much as 72c to $66.10 a barrel on the New York Mercantile Exchange, and traded at $66.33 at 12.43pm in Tokyo. The contract rose 39c to $66.82 on Wednesday. Total volume traded was about 5% below the 100-day average.

Brent for December settlement fell 52c to $75.65 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 27c to $76.17 on Wednesday. The global benchmark traded at a $9.35 premium to WTI.