West Texas Intermediate crude tumbled further into a bear market amid signs of a global glut. Brent, the benchmark grade for more than half the world’s oil, traded near a four-year low.
The US benchmark slumped as much as 2.5 percent Friday, while Brent slipped 2.2 percent. WTI closed Thursday more than 20 percent below its June peak, a common definition of a bear market. Brent is down 22 percent over a similar period.
The world’s two most-traded crude futures are collapsing because demand growth is slowing at a time when output is expanding from countries including the US and Russia, the largest suppliers outside the Organisation of Petroleum Exporting Countries (OPEC). The OPEC increased oil production by the most in almost three years last month as Libyan output surged.
“WTI is on track to at least touch $80,” Bill O’Grady, chief market strategist at Confluence Investment Management inSt. Louis, which oversees $1.4 billion, said. “The global economy is slowing and that’s going to impact demand. OPEC’s gotten a free ride the last few years because of the low level of Libyan production, but they’re back now.”
WTI for November delivery dropped 61 cents, or 0.7 percent, to $85.16 a barrel at 9:21 a.m. on the New York Mercantile Exchange. The contract touched $83.59, the lowest level since July 3, 2012. The volume of all futures traded was more than double the 100-day average for this time of day.
Brent for November settlement slipped 44 cents, or 0.5 percent, to $89.61 a barrel on the London-based ICE Futures Europe exchange. The contract reached $88.11, the lowest since December 2010. Volume was 60 percent higher than the 100-day average. The European crude traded at a $4.40 premium to WTI on ICE, up from $2.57 on October 3.
OPEC increased output by 402,000 in September to 30.47 million barrels a day, the group said in its monthly oil market report Friday. It was the biggest monthly gain since November 2011 and the largest production in more than a year. The organisation predicted demand will accelerate in the next few months.
Saudi Arabia and Iran, both OPEC members, are discounting their main crude export grades to Asian buyers by the most in almost six years, prompting speculation that some OPEC nations are competing for market share.
US oil output increased to 8.88 million barrels a day last week, the most since March 1986, according to the Energy Information Administration. Crude inventories in the world’s biggest oil consumer gained by 5.02 million barrels to 361.7 million in the week ended October 3, the EIA, the Energy Department’s statistical arm, said on October 8.
Russia increased output 0.7 percent to 10.61 million barrels a day last month, according to preliminary data from CDU-TEK, which is part of the Energy Ministry. The figure is within 0.3 percent of the post-Soviet record in January and is for crude and condensates, a type of oil that yields a greater proportion of high-value fuels.
State-run National Iranian Oil Co. cut official selling prices of its crude to buyers in Asia for November, two people with knowledge of the pricing decision said yesterday. The decrease came a week after Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008.
OPEC’s 12 members will probably announce a cut to either its output or formal production target at a meeting on Nov. 27, said 11 of 20 analysts surveyed by Bloomberg News. Estimates ranged from a reduction of 500,000 to 1 million barrels a day.
The International Monetary Fund (IMF) said on October 7, that the global economy will expand by 3.8 percent in 2015, down from a July projection of 4 percent. The International Energy Agency in Paris lowered its oil-demand forecasts for this year and next in its monthly report on September 11.
