West Texas Intermediate crude dropped to a three-year low as Saudi Arabia cut prices for exports to U.S. customers amid speculation stockpiles increased last week. Brent fell to a four-year low in London.
Oil plunged deeper into a bear market on speculation the largest producers in OPEC are keener on preserving market share rather than propping up prices. U.S. oil output has jumped to the highest in three decades, Russia is pumping the most since the fall of the Soviet Union and Libyan production is recovering while oil demand forecasts have been revised down.
“People are panicking,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion. “There is this pervasive belief that the Saudis are in a market-share war.” WTI for December delivery fell $1.59, or 2 percent, to $77.19 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 4, 2011. The volume of all futures traded was 52 percent above the 100-day average. Front-month WTI swung to a discount, or contango, yesterday versus the second month for the first time since April.