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.
Oil traded near $56 a barrel after snapping a record losing streak as traders assessed signs of rising United States crude inventories against the prospect of OPEC and allies cutting output.
Oil prices rose on Wednesday, ending the longest ever losing streak for USA crude, on the growing prospect of OPEC and allied producers cutting output at a meeting next month. Such a shift would anger U.S. President Donald Trump, who on Monday urged OPEC not to cut supply.
Brent oil prices have plunged 25 per cent since reaching a four-year high of more than $86 per barrel in early October. More than 830,000 contracts had changed hands as of 1:45 p.m. EST (1845 GMT), as funds shed positions with oil dropping to December 2017 lows. The oil cartel said it would start withholding crude in 2019 to tighten supply and prop up prices.
Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since a price collapse in 2014.
The meeting in Abu Dhabi over the weekend raised the odds of an output cut next month to "fairly high", and the reduction may be in the 1 million-barrels-a-day range, according to RBC Capital Markets.
Oil fell for a 12th consecutive session in its longest losing streak on record.
Brent ended down US$4.65, or 6.6 per cent, to US$65.47 a barrel, the largest one-day loss since July 2018.
Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown.
The dollar also put pressure on oil, hovering near 16-month highs, making crude more expensive for importers using other currencies. Trump admonished Saudi Arabia for planning to curb output and lamented prices that settled below US$56 a barrel for the first time in a year.
US crude oil output from its seven major shale basins is expected to hit a record 7.94 million barrels per day (bpd) in December, the US Department of Energy's Energy Information Administration (EIA) said on Tuesday.
Even as the Saudis have promised to reduce output, USA production reached 11.6 million bpd in the most recent week, a new record.
He said emerging concerns about weak global demand, rising USA production, and speculators rapidly bailing out of long positions were primary factors for the drop.