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Oil prices were taken down by a Wall Street selloff, which was caused by fears of a slowdown in global economic growth.
IG Market Analyst, Kyle Rodda says the concerns over a massive global over supply continue.
“As analysts forecast higher inventories and a higher-likelihood that major oil producing countries will prove unable (or unwilling) to collectively cut production.
The dynamic has prices of Brent Crude trading at $US62.50, and that of WTI at around $US53.50.” Mr Rodda said.
The international benchmark fell 7.6% to $61.71 overnight, hitting the lowest since the end of 2017.
Traders are concerned over growing US shale production and a weak economic outlook, as analysts predict they see further downside risk to oil prices as the outlook remains bleak.
US- Saudi relations also come into play, as US President Donald Trump is said to have strengthened relations with Saudi Arabia, despite allegations that Saudi Crown Prince Mohammed bin Salman had knowledge of the killing of journalist Jamal Khashoggi in Turkey last month.
Energy stocks continue to fall
IG Market Analyst, Kyle Rodda predicts energy stocks will continue to perform badly on Wednesday.
“Energy stocks were some of the worst performing for the overnight session -- a theme that is expected to persist today – while the oil sensitive Canadian Dollar fell to 1.33 on fears of a deterioration in that countries terms of trade. “Mr Rodda said.
The S&P energy index tumbled 3.3 % overnight leading sector losses, making the energy sector the worst performing overnight.
The Dow Jones Industrial Average fell 551.8 points, or 2.21%, to 24,465.64, the S&P 500 lost 48.84 points, and the Nasdaq Composite dropped 119.65 points.
Analysts predict the crash is largely dependent on the drop-in oil prices, and the US stocks sell off exacerbated by worries about economic growth.