Oil drops 4.0pc on oversupply

LONDON, Dec 18 (Reuters): Oil prices fell 4.0 per cent on Tuesday, dropping for a third consecutive session as reports of swelling inventories and forecasts of record US and Russian output combined with a sharp sell-off in global stock markets.

US crude oil fell $2.04, or 4.1 per cent, to a low of $47.84, its weakest since September 2017, before recovering to around $48.10 by 0920 GMT.

North Sea Brent crude fell $2.41, or 4.0 per cent, to a low of $57.20, a 14-month low, and last traded around $57.61, down $2.00.

Both crude oil benchmarks have shed more than 30 per cent since early October due to swelling global inventories.

"A large part of the move (lower) is due to a broader market sell-off, with both US and Asian equity markets coming under pressure," said commodities strategist Warren Patterson at Dutch bank ING in Amsterdam.

"Specifically for the oil market, there are no clear signs yet of the market tightening," he added.

The Organisation of the Petroleum Exporting Countries (OPEC) and other oil producers agreed this month to curb production by 1.2 million barrels per day (bpd), equivalent to more than 1.0 per cent of global demand, in an attempt to drain tanks and boost prices.

But the cuts won't happen until next month and meanwhile production has been at or near record highs in the United States (US), Russia and Saudi Arabia, undermining spot prices.

Russian oil output has hit a record 11.42 million bpd this month, an industry source familiar with the data told Reuters.

Oil production from seven major US shale basins is by the year-end expected to climb to more than 8.0 million bpd for the first time, the US Energy Information Administration said on Monday.

Inventories at the US storage hub of Cushing, Oklahoma, delivery point for the oil futures contract, rose more than 1.0 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape.

Another report from Moscow adds: Russia's oil output may decline next year due to a global reduction pact, Energy Minister Alexander Novak said on Tuesday, possibly halting an uninterrupted decade-long run of growth.

The Organisation of the Petroleum Exporting Countries (OPEC) and other large oil producers led by Russia agreed this month to resume cutting output as oil prices have plunged to less than $60 from more than $80 per barrel in October in a blow to many oil producing countries' coffers.

Russia has pledged to cut its production by 228,000 barrels per day (bpd) from a record-high monthly average of 11.41 million bpd.

Novak said this reduction will be achieved during the first quarter as production has exceeded 11.42 million bpd in December so far.

Novak, speaking at a committee of the ruling United Russia party at the lower house of parliament, said Russian oil production is set to rise this year by around 200,000 bpd to 556 million tonnes.