Oil Tumbles To End Near $77 As Saudi Arabia Cuts Prices For U.S. Buyers

(RTTNews) - U.S. crude oil plummeted to end at a three-year low on Tuesday for a fourth straight session, after Saudi Arabia announced a cut in prices to buyers in the U.S. and ahead of the official crude oil inventory data.

The European Commission's cut to its growth forecast for the euro area and some soft trade and factory orders data from the U.S. also weighed down the commodity.

Crude prices continued to be under pressure on demand growth concerns with fears of a supply glut with higher OPEC output in October and Saudi Arabia discounting prices to customers around the world. Last month, Saudi Arabia had announced a reduction in oil prices for its customers in Asia and Africa.

In economic news, the European Commission lowered its euro area growth forecasts, citing weak economy and slow improvement in the employment situation. The European Commission also reduced its inflation projection for 2015 and the current year.

Meanwhile, U.S. trade deficit widened much more than anticipated in September, reflecting a notable pullback in the value of exports, a Commerce Department report showed Tuesday.

As well, new orders for U.S. manufactured goods dropped in line with economist estimates in September, largely due to a sharp drop in orders for transportation equipment.

Investors also look ahead to the weekly inventories data from the American Petroleum Institute later today, and the U.S. Energy Information Administration weekly oil report on Wednesday for the week ended October 31. It is widely expected that supplies last week to have increased.

Light Sweet Crude Oil futures for December delivery, the most actively traded contract, plunged $1.59 or 2.0 percent to close at $77.19 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for December delivery scaled a high of $78.41 a barrel intraday and a low of $75.84.

On Monday, crude oil futures plunged to end $1.76 or 2.2 percent lower at $78.78 a barrel, weighed down by a strong dollar and a disappointing reading on Chinese factory activity.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 87.00 on Tuesday, down from its previous close of 87.29 late Tuesday in North American trade. The dollar scaled a high of 87.30 intraday and a low of 86.88.

The euro trended higher against the dollar at $1.2553 on Monday, as compared to its previous close of $1.2482 late Monday in North American trade. The euro scaled a high of $1.2576 intraday and a low of $1.2482.

In economic news from the U.S., a report from the Commerce Department showed trade deficit to have widened much more than anticipated to $43.0 billion in September, from a revised $40.0 billion in August. While value of imports was nearly unchanged, the value of exports fell 1.5 percent.

According to another report from the Commerce Department, new orders for U.S. manufactured goods dropped 0.6 percent in September, after tumbling 10.0 percent in August. The continued decrease in orders matched the consensus estimate.

Meanwhile, citing weak economy and slow improvement in the employment situation, the European Commission on Tuesday lowered the euro area growth forecast for 2015 to 1.1 percent from 1.7 percent predicted in May. The outlook for this year has been cut to 0.8 percent from 1.2 percent.

European Commission reduced inflation projection for 2015 to 0.8 percent from 1.2 percent, and for the current year it has been trimmed to 0.5 percent from 0.8 percent earlier.

Eurozone producer prices rose for the first time in three months in September, Eurostat reported Tuesday. Producer prices gained 0.2 percent in September from August, when prices fell by 0.2 percent. Economists had forecast prices to remain flat in September.

Elsewhere in Europe, U.K. construction sector growth slowed more than expected in October, a survey from Markit Economics and CIPS showed Tuesday. The seasonally adjusted Markit/CIPS construction purchasing managers' index fell to 61.4 in October from 64.2 in September. This was less than the 63.5 expected by economists.