SINGAPORE (Reuters) – Oil prices fell by 1 to 2 percent on Thursday amid volatile currency and stock markets, and on concerns that an economic slowdown in 2019 will cut into fuel demand just as crude supplies are surging.

U.S. West Texas Intermediate (WTI) crude oil futures dropped by 2.2 percent, or $1.01, from their last settlement to $45.53 by 0550 GMT.

International Brent crude futures were down 1.4 percent, or 76 cents, at $54.15 a barrel.

In physical oil markets, top exporter Saudi Arabia is expected to cut February prices for heavier crude grades sold to Asia by up to 50 cents a barrel due to weaker fuel oil margins, respondents to a Reuters survey said on Thursday.

“Fears of future economic and earnings growth continue to be the main driver in causing market jitters,” said Singapore-based brokerage Phillip Futures said.

Markets were roiled by a more than 3 percent slump of the U.S. dollar against the Japanese yen overnight, and after tech giant Apple cut its sales forecast.

“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple chief executive Tim Cook said.

The slowdown in China and turmoil in stock and currency markets is making investors nervous, including in oil markets.

Slowing economic growth would have a negative effect on oil prices as markets eye the potential for softer petroleum demand, Phillip Futures said.

Jefferies Financial Group wrote in a note to clients and employees that the start of the year was a period of “extreme disarray” and that “the future doesn’t feel as certain and optimistic, and the path forward does not seem as clear.”

Although the investment bank pointed out that especially the U.S. economy was “still in a good place”, it added that the Sino-American “trade war has become an impediment” and that “markets are extremely volatile and virtually impossible to anticipate or navigate.”

SUPPLY SURGE

More fundamentally, oil markets have come under pressure from a surge in supply just as demand growth is expected to slow amid the market turmoil.

U.S. crude production stood at a record 11.7 million barrels per day (bpd) in late 2018, making America the world’s biggest oil producer.

Others are not sitting idle, with Russian output reaching a record of more than 11 million bpd in 2018.

Supply from Iraq, the number two producer in the Organization of the Petroleum Exporting Countries (OPEC), is also up, with December exports at 3.73 million bpd, up from 3.37 million bpd in November.

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