Brent crude slumped to a new five-year low as OPEC’s decision last month to maintain output at a time of oversupply prompted a growing number of banks to cut price forecasts. West Texas Intermediate also slumped.
Futures dropped as much as 2.5 percent in London and 1.9 percent in New York. Morgan Stanley lowered its 2015 estimate by 29 percent in a report on Dec. 5, citing a decision by the Organization of Petroleum Exporting Countries not to lower a 30 million-barrel-a-day output target. Banks including BNP Paribas SA, Credit Suisse Group AG, UBS Group AG and Barclays Plc have also cut since the 12-nation group’s Nov. 27 meeting.
“The major forecasters continue to cut price expectations, especially for the first two quarters of 2015,” Ole Hansen, head of commodity strategy at
Saxo Bank A/S, said by e-mail. He forecasts Brent may drop as low as $60 a barrel within the next several months, a slump of about 12 percent from current prices.
Oil is trading in
a bear market amid signs that U.S. output
is expanding even after the decision by OPEC, which is
responsible for about 40 percent of global supplies. Explorers
in the U.S. increased the number of operating rigs last week,
defying predictions of a drilling slowdown, according to data
from Baker Hughes Inc. WTI Slide
Brent for January settlement declined as much as $1.72 to $67.35 a barrel on the London-based ICE Futures Europe exchange. That’s the lowest intraday price October 2009. It was down $1.47 at $67.60 at 10:14 a.m. in London. The European benchmark crude traded at a premium of $2.98 to WTI. WTI for January delivery dropped as much as $1.25 to $64.59 a barrel in electronic trading
on the New York Mercantile
Exchange and was at $64.65 at 10:15 a.m. London time. It slid 97
cents to $65.84 on Dec. 5, the lowest close since July 2009. The
volume of all futures traded was about 5 percent above the 100-day average for the time of day. Prices decreased 34 percent
this year. A surplus will peak in the second-quarter of next year after OPEC refrained from tackling an oversupply, Morgan Stanley analyst Adam Longson said in Dec. 5 report. The bank cut its 2015 estimate for Brent to $70 a barrel, from $98 previously. Longson said on Nov. 27, the day of the meeting, that “the bear case from OPEC has emerged.”
U.S. Rigs
The number of U.S. rigs in operation rose to 1,575 through Dec. 5, the first gain in three weeks, according to Baker Hughes, a Houston-based field services company. The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.U.S. oil production accelerated to 9.08 million barrels a day through Nov. 28, according to data from the Energy Information Administration data. That’s the fastest rate in weekly records that started in January 1983.
“This is primarily a supply-side issue,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone today. “Current supplies are too large for any foreseeable improvement in demand. The price needs to fall to a level that starts to really give the market some comfort that new projects are going to be put on the backburner and delayed.”
OPEC Quota
Saudi Arabia led OPEC’s decision to maintain output at the group’s meeting in Vienna, citing the threat from U.S. shale, Iranian Oil Minister Bijan Namdar Zanganeh said on Nov. 28. The group pumped 30.56 million barrels a day in November, exceeding its quota of 30 million for a sixth straight month, according to estimates compiled by Bloomberg.In Algeria, another OPEC member, Sonatrach will press ahead with its $90 billion investment plan in the country’s oil and gas industry even as crude trades near five-year lows, Said Sahnoun, the interim chief executive officer of the state-run energy producer, said at a conference in Algiers yesterday.
China, the world’s second-biggest oil consumer, imported 25.41 million metric tons of crude last month, according to preliminary data from the General Administration of Customs in Beijing today. Shipments increased to about 6.21 million barrels a day, up 9 percent from a month earlier.
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