Oil's stormy quarter draws to close with biggest loss since 2014

[SEOUL] Oil's set for its biggest quarterly drop since 2014, marking the end of a turbulent 2018 during which prices tumbled into a bear market only weeks after reaching a four-year high.

A 38 per cent plunge this quarter is dragging futures in New York to their first annual loss since 2015, with a volatility gauge soaring 100 per cent over the past three months. Investors are unsure if output cuts pledged by OPEC and its allies will be able to counter booming American production. Meanwhile, a trade dispute between the US and China as well as the Federal Reserve's monetary policy are stoking concerns over economic growth.

While a US plan to reimpose sanctions on Iranian oil drove prices to a four-year high in October, the Donald Trump administration's surprise decision to grant waivers from its restrictions to some nations sparked a collapse in crude. As OPEC and its partners including Russia prepare to cut 1.2 million barrels a day of output from January to stabilize the market, they face a challenge from American drillers who are pumping at record levels.

"Trump has reigned as the ultimate controller of oil prices this year because everything from sanctions against Iran, the trade war with China and even tensions with Saudi Arabia, he's been involved," Sungchil Will Yun, a commodities analyst at HI Investment & Futures Corp., said by phone. "While prices won't fall further from here, the pace of increase will also be quite gradual next year."

West Texas Intermediate for February was at US$45.42 a barrel on the New York Mercantile Exchange, up 9 cents, at 10:17 a.m. in Singapore. Prices are on track for a 25 per cent decline this year after climbing more than 60 per cent in the previous two years. Total volume traded was about 43 per cent below the 100-day average.

Brent for March settlement added 12 cents to US$53.33 a barrel on the London-based ICE Futures Europe exchange. The February contract expired Friday after closing 4 cents higher at US$52.20. The global benchmark crude has lost 35.5 per cent this quarter, and is headed for a 20 per cent annual drop. It traded at a premium of US$7.67 to March WTI.

Also in recent weeks, signs of slowing consumption, higher interest rates by the US Fed, political turmoil in Washington and uncertainty over America's trade spat with China have spurred a flight from risk assets including oil and equities.

BLOOMBERG