Oil prices continued its descent on Tuesday by dropping more than 1 percent, following falls from previous session. This took place the same time global markets deteriorated after one of the biggest intra-day falls ever recorded.
Brent crude oil futures were priced at $66.88 per barrel by 0445 GMT. It dropped 1.1 percent of 74 cents compared to previous close. Brent futures have fallen more than $4 from its highest-point for 2018 which was registered last month.
U.S. West Texas Intermediate crude futures were at $63.38 per barrel, falling 1.2 percent or 77 cents on latest settlement. It was down more than $3 from their highest recorded in 2018 so far.
Crude supplies are still relatively plenty despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia. They, along with nine other countries, struck a deal in January 2017 wherein they cut oil output by 1.8 million barrels per day (bpd) in order to prop up prices.
The high number of crude supplies is mostly attributed to soaring U.S. shale oil production. It has risen around 18 percent since the middle of 2016 and reached 10 million bpd. U.S. output has surpassed that of leading exporter Saudi Arabia.
Russia is the only one left above the U.S. output with production averaging 10.98 million bpd last year.
Traders were quick to point out that fundamentals also affect the correction in oil.
Financial markets plunged on Monday following a sharp rise in U.S. bond yields. This event raised alarms over rising inflation and possible higher interest rates.
The Dow Jones Industrial Average lost 4.6 percent on Monday, its largest in percentage since August 2011. In regards to absolute terms, the day’s 1,175 point loss was its biggest ever. The index dropped over 6 percent at one point.
U.S. S&P 500 futures were down 2.5 percent, plummeting to 4-month lows in Asian trade on Tuesday. This is mostly due to the sell-off being triggered by worries about inflation showing no sign of reducing.
“Suddenly, inflation has become one of the most-talked about issues in markets,” stated U.S. bank J.P. Morgan in a note addressed to clients.