WTI gains for third day as Iran seeks halt to price drop
West Texas Intermediate rose for a third day as Iran said it’s seeking to prevent further price drops, bolstering speculation that OPEC’s biggest producers are taking steps to support the market. Brent gained in London.
Futures climbed as much as 0.9 percent in New York, extending a rebound from the lowest level in more than two years. Iranian President Hassan Rouhani instructed the oil ministry to use diplomacy to halt the decline, state-run Mehr news agency reported. Saudi Arabia and Kuwait started cutting output from an oil field on Oct. 16, according to an internal memo signed by Khafji Joint Operations Chairman Abdullah al-Helal and obtained by Bloomberg News.
“There is general risk-on sentiment,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone today. “There hasn’t been a lot to change the oil fundamental outlook. The downtrend remains intact and any bounce we see here is a corrective rally.”
Oil is paring its collapse into a bear market as banks including BNP Paribas SA and Bank of America Corp. predict the rout may be over, in part counting on the Organization of Petroleum Exporting Countries to reduce output. Goldman Sachs Group Inc. said there’s no oversupply to justify the sell-off.
WTI for November delivery, which expires tomorrow, advanced as much as 73 cents to $83.48 a barrel in electronic trading on the New York Mercantile Exchange and was at $83.10 at 2:52 p.m. Singapore time. The more-active December contract was up 30 cents at $82.36. The volume of all futures traded was about 3 percent above the 100-day average. Front-month prices have lost 16 percent this year.
Brent for December settlement increased as much as 54 cents, or 0.6 percent, to $86.70 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $3.90 to WTI for the same month, compared with a close of $4.10 on Oct. 17.
Rouhani told Iranian Oil Minister Bijan Namdar Zanganeh to use the “oil diplomacy tool” to try to prevent further decreases, Mehr cited Mohammad Bagher Nobakht, the vice president for planning and strategic supervision, as saying. Zanganeh made proposals after the president’s request, Nobakht said, without giving details.
Saudi Arabia and Kuwait have signaled the fall in prices doesn’t warrant immediate production cuts. OPEC’s 12 members, which pump about 40 percent of the world’s crude, are scheduled to meet on Nov. 27 in Vienna.
The 300,000 barrel-a-day Khafji field, located in the neutral zone between Saudi Arabia and Kuwait, was being shut due to environmental concerns, a person familiar with Saudi oil policy said on Oct. 17, asking not to be identified because the information isn’t public.
WTI has lost 23 percent from its June peak amid rising supplies from the U.S. and OPEC producers. U.S. output accelerated for a second week to 8.95 million barrels a day, the most since June 1985, according to the Energy Information Administration. Crude inventories expanded by 8.92 million barrels to 370.6 million in the week ended Oct. 10, the highest level since July.
Rising OPEC output has prompted speculation its members are fighting for market share. The group pumped 30.47 million barrels a day in September, the most since August 2013, its monthly report on Oct. 10 showed.
Iraq, the group’s second-largest producer, plans to raise November crude exports from the Basrah Oil Terminal by 400,000 barrels a day to 2.83 million, according to a preliminary loading program. That’s the most since at least 2012, when Bloomberg started tracking data.
Money managers cut net-long positions on WTI by 8.1 percent in the week ended Oct. 14, data from the U.S. Commodity Futures Trading Commission data show. Short positions rose to the highest level in 22 months.