Brent crude oil price has dropped below $70 per barrel for the first time since December 2021.
During trading hours on Tuesday, Brent crude, the global oil benchmark, dropped by 3.45 percent to $69.36 per barrel.
On the other hand, West Texas Intermediate (WTI) fell by 3.86 percent to $66.06 a barrel.
According to a Bloomberg report, adverse economic statistics from the United States (US) and China — notably the dismal import numbers that were made public on Tuesday — have stirred fears about the demand for oil in the top two consumers and increased the likelihood that there will be a surplus in the coming year.
The publication said the fear was compounded by surging output in producing nations outside the Organisation of Petroleum Exporting Countries (OPEC).
The decline in the oil price comes five days after OPEC and its allies (OPEC+) postponed plans to increase production by 180,000 barrels a day (bpd).
According to OPEC, countries, including Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, decided to extend their voluntary cuts of 2.2 million bpd until November.
Thereafter, OPEC said the cuts would be gradually phased out on a monthly basis starting December 1, “with the flexibility to pause or reverse the adjustments as necessary”.
The oil cartel said overproducing countries also reconfirmed their commitment that the entire overproduced volume will be fully compensated for by September 2025.
Meanwhile, global stock markets diverged as traders assessed the outlook for interest rates in the United States and Europe and looked ahead to the release of fresh consumer inflation data on Wednesday.
Brent crude slumped more than three percent to below the $70 per barrel level, while the main US contract, West Texas Intermediate (WTI), tumbled during trading and closed down more than four percent.
US equities finished mixed Tuesday, after Friday’s slump on the back of disappointing US jobs data, which rekindled fears the Federal Reserve had waited too long to begin cutting interest rates.
The Dow Jones Industrial Average finished down 0.2 percent, while the broad-based S&P 500 gained 0.5 percent, and tech-rich Nasdaq Composite Index rose 0.8 percent.
Traders were also keeping an eye on US politics on Tuesday, ahead of the sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump.
Investors were also looking ahead to US consumer inflation data due Wednesday.
“Tomorrow’s US inflation figures could be the next key test of investor sentiment,” noted AJ Bell investment director Russ Mould.
The Federal Reserve is widely expected to cut US interest rates at next week’s meeting, but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.
But Tuesday’s plunge in oil prices may indicate that those fears are outweighed by concern that policymakers are behind the curve.
“Financial markets have shifted their focus from bringing down inflation to shoring up economic growth,” said Saira Malik, chief investment officer at asset manager Nuveen.
“Market volatility has climbed amid downside surprises in macroeconomic data — especially labour market indicators,” she added.
Fresh worries about China’s economy are also dampening sentiment, with a mixed trade data doing little to soothe investor concerns.
China’s leaders are now facing pressure to unveil fresh stimulus for the world’s number two economy, although they have so far shown little appetite for doing so.
European stocks finished the day lower, as traders anticipated a European Central Bank rate cut later in the week.
And in Britain, official data published Tuesday showed wages grew at the slowest pace in two years, reducing the chances of a Bank of England rate cut next week.
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