By BLOOMBERG
West Texas Intermediate and Brent extended declines from the lowest close in more than five years amid speculation that US oil producers will fight Opec for market share.
Futures dropped as much as 1.8% in New York and 1.9% in London. Explorers in the US increased the number of operating rigs last week, defying predictions of a drilling slowdown, according to data from Baker Hughes Inc Brent’s 14- day relative strength index has been below 30 since Nov 27, a reading that signals crude is oversold.
Oil is trading in a bear market amid signs that US output is expanding even after the Organization of Petroleum Exporting Countries (Opec) opted not to reduce its production target. The 12- member group is responsible for about 40% of the world’s supply. Falling prices will put “short-term pressure” on Iran’s budget, President Hassan Rouhani said in parliament yesterday, the Iranian Students’ News Agency reported.
“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 that new projects are going to be put on the backburner and delayed.”
WTI for January delivery dropped as much as US$1.21 (RM4.21) to US$64.63 a barrel in electronic trading on the New York Mercantile Exchange and was at US$65.09 at 12:36 pm Singapore time. It slid 97 cents to US$65.84 on Dec 5, the lowest close since July 2009. The volume of all futures traded was about 19 percent above the 100-day average. Prices have decreased 34% this year.
Rig count
Brent for January settlement declined as much as US$1.34 to US$67.73 a barrel on the London-based ICE Futures Europe exchange. The contract lost 57 cents to US$69.07 on Dec 5, the lowest since October 2009. The European benchmark crude traded at a premium of US$3.17 to WTI.
The number of US 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.
US oil production climbed to 9.08 million barrels a day through Nov 28, Energy Information Administration data showed. That’s the fastest rate in weekly records that started in January 1983.
Opec Quota
Saudi Arabia led Opec’s decision to maintain output at a meeting in Vienna, citing the threat from US 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 a Bloomberg survey of oil companies, producers and analysts.
Algeria will press ahead with its US$90 billion investment plan in the North African country’s oil and gas industry even with crude prices trading near five-year lows, Said Sahnoun, the interim chief executive officer at the state-run energy producer Sonatrach, said at a conference in Algiers yesterday.
The Bloomberg Dollar Spot Index was near the highest level since March 2009, damping the investment appeal of commodities. The measure, which tracks the greenback against 10 trading partners, was little changed today after closing at 1,122.34 at the end of last week.
— by Ben Sharples
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