Oil plunged the most in more than a year as early signals that demand is flagging exacerbated markets’ unease over the prospect of a punishing stretch of high interest rates.

West Texas Intermediate slumped 5.6 per cent to settle below US$85 a barrel, the biggest one-day drop since September 2022. Despite signs of a tight market currently, the prospect of more supplies in the future, as well as technical selling and algorithm-driven traders rushing to exit, pushed the price decline into a full-blown rout. Crude’s plummet drove the Bloomberg Commodity Spot Index to the biggest tumble since March, when the U.S. banking crisis roiled markets.

After rallying about 40 per cent from mid-June to late September, crude has reversed course over the past week amid a drumbeat of commentary that the surge was overdone. The retreat has come against a backdrop of rising angst about interest rates and the economy that has rattled equity and bond markets in recent weeks. U.S. government figures on Wednesday showing gasoline demand dropped to the lowest seasonal level in 25 years only added to the gloom.

“There is no doubt that having a horrible demand print, in a period where the world is worrying about demand yet again, compounded the selling pressure today,” said Greg Sharenow, who manages a portfolio focused on energy and commodities at Pacific Investment Management Co.

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Both WTI and global benchmark Brent have now dropped below their 50-day moving averages, a bearish technical signal. Gasoline futures plummeted 6.9 per cent to trade at about US$2.20 a gallon.

Meanwhile, inventories at the largest U.S. storage hub in Cushing, Oklahoma, increased for the first time in eight weeks. Still, stockpiles nationwide continued to drain to the lowest since December 2022, and a key North American pipeline has also seen lower flows this week. 

Earlier, OPEC+ leaders Saudi Arabia and Russia committed to sticking with production curbs of more than 1 million barrels a day until the end of the year. Those supply cuts had spurred the recent rally by tightening the market, shrinking inventories and increasing competition for prompt barrels. 

But recent sessions have seen investors fretting that the Federal Reserve may not be done raising interest rates, strengthening the dollar, which makes commodities more expensive for most buyers. Major gains in U.S. Treasury yields have also hurt raw materials.


  • WTI for November delivery shed US$5.01 to settle at US$84.22 a barrel in New York.
  • Brent for December settlement fell US$5.11 to US$85.81 a barrel.