Oil set for biggest monthly drop since 2012 on global oversupply
By Bloomberg
West Texas Intermediate crude headed for the biggest monthly decline in more than two years amid signs that OPEC boosted production to a 14-month high. Brent slid in London.
Futures fell as much as 0.6 percent in New York, bringing October's drop to about 11 percent. Output from the 12-member Organization of Petroleum Exporting Countries increased by 53,000 barrels a day to 30.974 million, a third monthly gain, a Bloomberg survey shows. Traders are split on whether Saudi Arabia will deepen the crude price cuts that propelled oil into a bear market this month.
WTI and Brent are down more than 20 percent from their June peaks, meeting a common definition of a bear market, as leading OPEC members resisted calls to reduce supply. Global supplies are rising, with the U.S. pumping at the fastest pace in more than three decades while Russia's output climbed to near a post- Soviet record.
"OPEC members are keeping prices low by raising their production as a way to remain competitive against the expanding output in the U.S.," Will Yun, a commodities analyst at Hyundai Futures Inc. in Seoul, said by phone today. "Positive economic data we saw from the U.S. failed to provide an upward push to oil as supply concerns are too deeply rooted."
The Federal Reserve said this week the U.S. labor market has strengthened enough to withstand an end to its unprecedented asset-purchase program.
WTI for December delivery declined as much as 52 cents to $80.60 a barrel in electronic trading on the New York Mercantile Exchange and was at $80.75 at 3:35 p.m. Singapore time. The contract slid $1.08 to $81.12 yesterday. The volume of all futures traded was about 36 percent below the 100-day average. Prices have decreased 18 percent this year.
OPEC Supply
Brent for December settlement slid as much as 74 cents, or 0.9 percent, to $85.50 a barrel on the London-based ICE Futures Europe exchange. Prices have dropped 9.5 percent this month. The European benchmark crude traded at a premium of $4.91 to WTI, compared with $5.12 at the end of last week.
Production from OPEC, which is responsible for about 40 percent of the world's oil supply, were led by gains in Iraq, Saudi Arabia and Libya, according to the Bloomberg survey of companies, producers and analysts. September's total was revised 14,000 barrels a day lower to 30.921 million.
Saudi Arabia, Iraq, Iran and Kuwait have cut their export prices this month, fueling speculation that they'll compete for market share. OPEC ministers are scheduled to meet on Nov. 27 in Vienna to discuss their output target of 30 million barrels a day, which has been unchanged since January 2012.
Saudi Prices
State-run Saudi Arabian Oil Co. this month reduced official selling prices for November shipments to buyers in Asia to the lowest level since December 2008.
"The Saudis on a regular basis adjust their prices, but this one loomed larger," Daniel Yergin, the vice-chairman of IHS Inc., an Englewood, Colorado-based consultant, said in Singapore. "The message is that 'we're not going to lose market share to Iraq, Iran or other countries. We are going to be competitive'."
The world's biggest oil-exporting company will offer further discounts when it announce prices for December sales next week, according to seven respondents in a separate Bloomberg survey of 15 traders. Six people forecast cargo prices to be unchanged and two predict an increase.
WTI may extend losses next week, another Bloomberg survey shows. Twelve of 30 analysts and traders, or 40 percent, forecast futures will decline through Nov. 7, while 11 predict a price advance.