Oil prices fell more than 4% today, hitting their lowest in more than a year on worries about oversupply and the outlook for energy demand as a US interest rate rise knocked stock markets.
Equities dropped worldwide after the US Federal Reserve raised rates and maintained most of its guidance for additional hikes over the next two years, dashing investor hopes for a more dovish policy outlook.
US light crude oil fell by $2.35 a barrel, or 4.9%, to a low of $45.82, before recovering some ground to around $46.60 by early this afternoon.
North Sea Brent dropped by $2.60, or 4.5%, to $54.64 a barrel, its lowest since September 2017, and last traded around $55.44, down $1.80.
Both major oil futures contracts rallied sharply yesterday but are now at or close to their lowest levels for over 15 months, more than 30% below multi-year highs reached at the beginning of October.
The Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed this month to curb output by 1.2 million barrels per day (bpd) in an attempt to drain tanks and boost prices.
But the cuts will not happen until next month, and production has been at or near record highs in the US, Russia and Saudi Arabia.
Saudi Energy Minister Khalid al-Falih said he expected global oil stocks to fall by the end of the first quarter, but added that the market remained vulnerable to political and economic factors as well as speculation.
OPEC plans to release a table detailing voluntary output cut quotas for its members and allies such as Russia in an effort to shore up prices, OPEC Secretary-General Mohammad Barkindo said in a letter seen by Reuters today.
US inventory data offered some support for oil prices. US crude inventories fell by 497,000 barrels in the week to December 14, the US Energy Information Administration said.
This was smaller than the decrease of 2.4 million barrels analysts had expected.
Distillate stockpiles, which include diesel and heating oil, dropped by 4.2 million barrels, the EIA said, compared to expectations of a 573,000-barrel increase.
Distillate demand rose to the highest since January 2003, which bolstered buying, particularly in heating oil futures, the market's proxy for diesel.