Brent crude headed for a bear market on speculation rising global supplies will be more than enough to meet slowing demand.
Prices fell for a fourth day after closing almost 20 percent below their June peak yesterday, a common definition of a bear market. OPEC September oil production rose to a one-year high and Saudi Arabia cut prices this week. US output is near the most since 1986. The Bloomberg Dollar Spot Index climbed to a four-year high.
“You are seeing pretty good growth in oil supply and that’s weighing on the market,” said Greg Sharenow, executive vice president at Pacific Investment Management Co., who helps manage $26 billion of commodity investments. “You have the strengthening dollar. And this has been a big part of how it’s been trading recently.”
Brent for November settlement slipped $1.90, or 2 percent, to $91.52 a barrel at 11:30am New York time on the London-based ICE Futures Europe exchange. The volume of all futures traded was about 27 percent above the 100-day average. Prices have decreased 5.6 percent this week.
West Texas Intermediate crude for November delivery fell $1.59, or 1.8 percent, to $89.42 a barrel on the New York Mercantile Exchange. It traded below $90 yesterday for the first time since April 2013. Prices have slipped 4.4 percent this week. The US benchmark earlier fell to a discount of as little as $1.51 to Brent on ICE, the smallest gap since August 2013, before widening out.
Gasoline futures dropped as much as 2.4 percent to $2.3511, the least since January 2011. A lower price for Brent can cut US gasoline prices by reducing the cost of crude and fuel imports to the US.
“I am looking for WTI to establish a floor possibly as low as $85, which could possibly take Brent to $88,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The Brent-WTI spread would probably end up staying at $2 or $3. US production is going to continue to increase.”
The Bloomberg Dollar Spot Index increased as far as 1,080.05. A stronger dollar reduced crude’s investment appeal.
Output from the 12-member Organisation of Petroleum Exporting Countries rose by 413,000 barrels a day to 30.935 million in September, a Bloomberg survey of oil companies, producers and analysts showed. That’s the highest level since August 2013.
US domestic crude production rose to 8.87 million barrels a day in the week ended September 19, the most since March 1986, according EIA estimates.
