WTI extends decline from 22-month low as supply gain seen

2014-10-14 11:27:47

West Texas Intermediate extended its rout from the lowest price in 22 months amid speculation that rising U.S. stockpiles are exacerbating a global glut that’s driven prices into a bear market. Brent fell in London.

Futures dropped as much as 1.1 percent in New York, declining for the fifth time in six days. U.S. crude stockpiles probably expanded by 2.5 million barrels last week to 364.2 million, according to a Bloomberg News survey before a report from the Energy Information Administration on Oct. 16. That would be the highest level in two months.

Oil futures have collapsed into bear markets as shale supplies boost U.S. output to the highest level in almost 30 years amid signs of weakening global demand. The biggest producers in the Organization of Petroleum Exporting Countries are responding by cutting prices, sparking speculation that they will compete for market share rather than reduce supply.

“It’s up to OPEC to do something because the U.S. isn’t going to slow down production,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “The market is concerned with the supply-demand scenario.”

WTI for November delivery slid as much as 91 cents to $84.83 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.43 at 3:57 p.m. Singapore time. The contract lost 8 cents to $85.74 yesterday, the lowest close since December 2012. The volume of all futures traded was about 6 percent above the 100-day average. Prices have decreased 13 percent this year.

Oil Supplies

Brent for November settlement fell as much as 81 cents, or 0.9 percent, to $88.08 a barrel on the London-based ICE Futures Europe exchange. It dropped $1.32 to $88.89 yesterday, the lowest since December 2010. The European benchmark crude traded at a premium of $3.20 to WTI, compared with $3.15 yesterday.

U.S. crude output climbed to 8.88 million barrels a day in the week ended Oct. 3, the most since March 1986, according to the EIA. Gasoline and distillate inventories, which include heating oil and diesel, probably shrank last week, according to the median estimate in the Bloomberg survey of eight analysts before data from the Energy Department’s statistical arm.

OPEC, which supplies about 40 percent of the world’s crude, is raising output as its members fight for market share while seeking to meet increased domestic demand. The group pumped 30.47 million barrels a day in September, the most since August 2013, its monthly report on Oct. 10 showed.

OPEC Meeting

Saudi Arabia, OPEC’s largest producer, needs to cut prices to Asia further to restore a competitive position against other Middle Eastern and West African suppliers, according to JPMorgan Chase & Co. A reduction of 70 cents to $1 a barrel seems appropriate, the bank said in an e-mailed report.

Iraq said on Oct. 12 that it will sell its Basrah Light crude to Asia at the biggest discount since January 2009, following cuts by Saudi Arabia and Iran. Middle East producers almost always follow the lead of OPEC’s largest member when setting export prices.

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the price slump prompted Venezuela to call for an emergency OPEC meeting. The group is scheduled to gather on Nov. 27 in Vienna.

While producers would like higher prices, there’s “no room” for them to achieve that by reducing supply, Kuwait’s Oil Minister Ali Al-Omair told the official Kuwait News Agency yesterday. Saudi Arabia won’t alter its supplies much between now and the end of the year, a person familiar with its oil policy said on Oct. 3.