Saudi sales cut fails to halt oil price slide

PRICE PLUMMETS: Oil continues to fall despite Saudi Arabia's announcement that it has cut sales to Asia. (Getty Images)

Oil prices tumbled more than $2 to near $60 a barrel on Tuesday as a firmer dollar and renewed gloom over the global economy wiped away the brief euphoria that greeted Beijing's $600 billion stimulus plan.

News on Monday that Saudi Arabia had cut oil sales to major customers in Asia and Europe also failed to turn the tide on a market that has shed 60 percent of its value since hitting a record high $147 a barrel in July as the dawning of a global recession depresses demand from both consumers and investors.

US light, sweet crude for December delivery fell $1.91 or 3 percent to $60.50 a barrel by early Tuesday, abruptly ending a mild two day rally. Prices ended 2 percent higher on Monday after touching a near 20-month low of $59.10 a barrel.

London ICE Brent crude fell $1.74 to $57.34.

Doom and gloom returned to Asian markets on Tuesday after a brief glimmer of hope appeared at the weekend in the form of China's near $600 billion spending package, which aims to boost demand in the world's fourth-largest economy.

But US stocks dipped on Monday as investors expressed doubts about whether the stimulus plan would avert a global economic slump and shares of General Motors fell to 62-year lows on worries about its dwindling cash.

Japan's benchmark Nikkei average followed suit on Tuesday, falling 3.4 percent while the dollar rose 0.6 percent against the euro in early trade, unravelling Monday's gains.

"The losses started after the stock market closed down, so demand fears are certainly a factor," said Ken Hasegawa, manager of commodity derivatives sales at broker Newedge in Tokyo. "But there is not one decisive factor leading this."

With the focus on demand destruction rather than supply, news that Saudi Arabia had told refiners in Asia it would cut December supplies by 5 percent, signalling its adherence to OPEC's deal to cut output, failed to sustain early gains.

In a clear sign of how supply-side concerns have been sidelined by investors, traders were unfazed by a threat from Nigeria's most prominent militant group to renew attacks on the oil sector if soldiers stormed its hideouts.

A military spokesman denied such plans.

Data due later on Tuesday will provide the latest evidence of oil demand in China, the world's second-largest consumer, with import figures likely to show a near total halt to imports of diesel and gasoline and likely tepid growth in crude purchases.

In the United States, the latest weekly inventory data is likely to show rising stockpiles as demand remains weak.

Crude oil stocks were expected to have risen by 800,000 million barrels last week, while distillate stocks should rise by 500,000 million barrels and gasoline by 800,000 million-barrels, a preliminary poll of analysts showed. (Reuters)

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