The rout in European stocks continued on Friday after a warning by the International Energy Agency (IEA) about a worsening supply glut pushed oil prices to new seven-year lows.
Oil prices plunged to new seven-year lows on Friday after the IEA said the global oversupply could worsen next year, suggesting that demand growth was starting to slow. The IEA described the global oil oversupply as “unrelenting” in its monthly report and acknowledged “first signs of a slowdown” in global demand in the fourth quarter of 2015.
“Consumption is likely to have peaked in the third quarter and demand growth is expected to slow to a still-healthy 1.2 million [barrels per day] in 2016, as support from sharply falling oil prices begins to fade,” the IEA said in a monthly report released on Friday.
Global benchmark Brent crude declined 59 cents or 1.5% to $39.14 a barrel on ICE Futures Europe. It was on pace for its lowest close since 2008. The West Texas Intermediate (WTI) benchmark for US crude fell 44 cents or 1.2% to $36.32 a barrel on the New York Mercantile Exchange.
The oil markets have been caught in a death spiral since last Friday’s OPEC meeting, where oil ministers agreed to keep production above 30 million barrels per day.
Commodity weakness extended beyond the oil and gas sector to include precious metals, which declined sharply on Friday. Gold for February delivery fell $8.10 or 0.8% to $1,063.90 per troy ounce. Silver futures also fell 18 cents or 1.3% to $13.93 per ounce.
The rout in commodities continued to dampen investor sentiment, resulting in yet another selloff for European stocks, which are on pace for their second consecutive weekly decline.
The FTSE 100 Index in London declined 1.3% on Friday, extending its four-week loss to around 4.5%. Frankfurt’s DAX plunged nearly 200 points or 1.8% in intraday trade. The CAC 40 Index in Paris and IBEX 35 in Madrid declined more than 1%.
The pan-European STOXX 600 fell 1.3%, its fourth consecutive loss as all sectors traded in the red.
Asian markets closed mixed on Friday. Tokyo’s Nikkei Index rebounded 1% after three straight daily losses. China’s CSI 300 Index declined 0.4%, its third loss in four days. Hong Kong’s Hang Seng Index plunged 241 points or 1.1% for its fourth consecutive loss.
American stock futures were also trading sharply lower on Friday after posting a modest rally the previous day. The Dow Jones mini was down more than 150 points ahead of the opening bell.