American oil plunges more than 2pct on supply glut woes
Crude futures lost ground in early Asian trading on Monday, with
US oil plunging more than 2 percent, pressured by a global supply
surplus despite a cut in the number of US rigs for an eleventh week
out of 12, Reuters reported.
US crude's West Texas Intermediate (WTI) January contract CLc1 had
dropped 91 cents, or 2.17 percent, to $40.99 a barrel by 02:15 GMT.
That was near levels seen on Friday before the US crude December
contract expired.
Benchmark front-month Brent futures for January LCOc1 fell 60
cents, or 1.34 percent, to $44.06 a barrel, after ending up 48
cents at $44.66 a barrel on Friday.
"The burden of carrying high US crude oil inventories is large,"
Kang Yoo-jin, commodities analyst at NH Investment and Securities
in Seoul, said in a note on Monday.
"The markets would likely rebound only if they saw a fall in US
crude inventories, while declining US crude output and seasonal
demand provide some support to oil at low prices."
Venezuela's oil minister said on Sunday that OPEC cannot allow an
oil price war and must take action to stabilize the crude market
soon. When asked how low oil prices could go in 2016 if OPEC
doesn't change its policy, he said: "Mid-20s."
BMI Research, part of the Fitch ratings agency, said: "What is
underway now is a structural market rebalancing in which low oil
prices clear out high cost production - a relatively small part of
which is US shale. It is not the result of OPEC policy, but of the
basics of supply and demand."
US crude was briefly supported on Friday as US drillers removed 10
oil rigs in the week ended Nov. 20, the biggest weekly decline
since late October, bringing the total rig count down to 564, oil
services company Baker Hughes Inc (BHI.N) said in its closely
followed report.
US crude's December futures CLZ5 which expired on Friday ended 15
cents down at $40.39 after hitting a low of $38.99, the cheapest
since Aug. 27.
Markets were keeping an eye on developing geopolitical tensions in
the oil-producing Middle East as Jordan's King Abdullah, a US ally,
will hold talks in Moscow on Tuesday with Russian President
Vladimir Putin on how to tackle "terror groups" led by Islamic
State in Syria, an official source said.
Meanwhile, Algeria's energy earnings are forecast to fall to $26.4
billion next year after low oil prices cut into the OPEC nation's
economy, Finance Minister Abderrahmane Benkhalfa said on
Sunday.
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