[NEW YORK] Brent crude oil plunged as much as US$6.50 a barrel on Thursday, and US crude fell by nearly as much, posting the steepest one-day falls since 2011, after Opec decided against cutting output despite a huge oversupply in world markets.
Asked whether the oil producer group had decided not to reduce production, Saudi Arabian Oil Minister Ali al-Naimi told reporters: "That is right." Oil prices have fallen by more than a third since June as increasing production in North America from shale oil has overwhelmed demand at a time of sluggish global economic growth.
Ministers from the Organization of the Petroleum Exporting Countries (Opec) had been discussing at their meeting in Vienna whether to agree a production cut in an attempt to rebalance the global oil market.
Crude prices have been falling all week as traders and analysts scaled back expectations of an Opec production cut, but the sharp dive after Thursday's meeting showed the decision was not fully priced in.
Benchmark Brent futures settled at US$72.58 a barrel, down US$5.17, after hitting a four-year low of US$71.25 earlier in the session. The contract was on track for its biggest monthly fall since 2008.
US crude was last down US$4.64 at US$69.05 a barrel. Prices fell rapidly in early US trade, before stabilizing as market activity dropped off towards midday, with many traders away for the US Thanksgiving holiday.
At its lowest point on Thursday, US crude traded at US$67.75, nearly US$6.00 down on the day, its weakest since May 2010.
The cartel, whose largest producer and exporter is Saudi Arabia, will meet again in June next year, said an Opec delegate.
Tariq Zahir, analyst at Tyche Capital Advisors in New York, said the slide in US crude could continue below US$65 a barrel in coming weeks, a factor that may start to challenge the economics of North American shale oil production. "I really think we will start getting into a price war,"Zahir said. "I think you would be a little crazy to try to pick a bottom here. I expect to see a bounce but any bounce will be sold into."
Oil analysts said the Opec decision left the oil market vulnerable to much bigger falls as abundant supply of high quality, light crude oil floods world markets, much of it from shale oil in North America. "In the short term, given market skepticism that recent price levels are low enough to substantially slow US output growth, we expect price levels to drop below US$70/bbl for Brent and even lower for WTI (US crude)," Barclays analysts said in a note.