Fears Loomed Large in Oil’s Worst Quarter Since 2014

The U.S. crude benchmark finished the year 25% lower after a slump that shaved $30 off oil prices

The oil market is engulfed by fears of a global growth slowdown, as worries grow that falling demand and robust output from major producers will lead to a supply glut.
U.S. crude prices fell 38% from the end of September through the end of 2018—the biggest quarterly slide since the final months of 2014, when oil began a collapse that would eventually push West Texas Intermediate futures below $30 a barrel.
On Monday, WTI settled at $45.41, after falling 25% in 2018. Brent, the global benchmark, closed at $53.80, marking a 20% fall in 2018.
New LowU.S. crude has slumped to its lowest levels ofthe year amid a fourth-quarter price rout.Source: Dow Jones Market Data
.a barrelJan. ’18JuneNov.4045505560657075$80
May 24, 2018x$70.71 a barrel
Oil prices continued to decline in the final weeks of the year, even after Organization of the Petroleum Exporting Countries in early December agreed to reduce output. It was the latest blow to investors who had wagered that the market would continue to march higher after reaching a nearly four-year high of $76.41 in October.
Swelling production figures out of the U.S., Saudi Arabia and Russia triggered the price slump during the fourth quarter, while unexpected sanction waivers by the Trump administration to buy Iranian crude compounded bearish sentiment.
A lack of resolution in the U.S.-China trade dispute also has prompted analysts to lower their price targets for oil. Citigroup now expects supply to exceed demand every quarter in 2019 and for U.S. prices to stay around $50 while Brent averages $60.
“The optimism that was out there has diminished,” said Ric Navy, senior vice president for energy futures at R.J. O’Brien & Associates. “People are getting worn down.”
Lackluster economic reports from across the world also have pummeled assets such as stocks, fueling anxiety broadly.
Hedge funds and other speculative investors have cut bullish oil wagers in 14 of the past 15 weeks. Net bets on higher U.S. crude are at their lowest level since August 2016, Commodity Futures Trading Commission data through Dec. 18 show.
“Nobody in the oil market was counting on a prolonged trade war between the world’s two largest economies,” said Rob Thummel, who manages energy assets for Tortoise, a Leawood, Kan.-based asset manager.
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