Oil set for seventh weekly drop as OPEC reaffirms supply

Oil headed for a seventh weekly decline in New York and London amid speculation that OPEC won’t pare output to reduce a global surplus.

West Texas Intermediate slipped as much as 1 percent while Brent fell 1.9 percent. The UAE has no plans to reduce output no matter how low prices drop, according to Yousef Al Otaiba, the nation’s ambassador to the US Representatives from Saudi Arabia, Kuwait and the UAE stressed a dozen times in the past six weeks that OPEC won’t curb output to halt the rout. WTI’s discount to Brent shrank to its narrowest since October.

“The price war continues and there’s a great deal of excess supply,” Phi; Flynn, senior market analyst at the Price Futures Group in Chicago said.

“The statements from the UAE ambassador show that they’re doubling down and taking no prisoners. This will be a long fought war and they have the Saudis behind them.”

Oil is trading near the lowest levels since April 2009, amid concern that a global supply surplus estimated by Qatar at 2 million barrels a day will persist this year. The Organisation of Petroleum Exporting Countries is battling a US shale boom by resisting production cuts, signaling it’s prepared to let futures fall to a level that slows the American output.

West Texas Intermediate for February delivery slipped 24 cents, or 0.5 percent, to $48.55 a barrel at 9:08am on the New York Mercantile Exchange. The volume of all futures traded was 12 percent above the 100-day average for the time of day. The contract touched $46.83 on January 7, the lowest intraday price since April 21, 2009. Futures are down 7.9 percent this week.

Brent for February settlement decreased 57 cents, or 1.1 percent, to $50.39 a barrel on the London-based ICE Futures Europe exchange.

The European benchmark crude traded at a $1.84 premium to WTI.

Futures rebounded from the session’s lows after government data showed that US employment rose more than forecast in December and the jobless rate declined to 5.6 percent, wrapping up the best year for the labor market since 1999, and adding to evidence the US is a standout in the global economy.

The UAE can live with current market conditions for “a lot longer than people expect,” Al Otaiba, the ambassador, said. “This extra glut in the market is not coming from the OPEC members, so therefore why should the OPEC members have to cut their production?”

OPEC’s 12 members agreed on Nov. 27 to maintain their collective output quota at 30 million barrels a day. OPEC produced 30.2 million barrels a day of crude last month, according to data compiled by Bloomberg. They’re next scheduled to meet on June 5.

US producers are bailing out of long-term contracts for drilling rigs as prices slide below $50 a barrel.

Helmerich & Payne Inc, the biggest rig operator in the US, said it had received early termination notices for four contracts, while Pioneer Energy Services Corp. said four rigs have been canceled early.

Producers may cut short another 50 to 60 agreements, according to Andrew Cosgrove, an analyst at Bloomberg Intelligence.

Implied volatility for at-the-money options in the front-month WTI contract advanced to 60.2 percent last week, the highest level in more than three years, data compiled by Bloomberg show.