BackBrent crude falls below $100 for first time in 16 months
Brent for October settlement decreased 1% to $99.83 a barrel on ICE Futures Europe exchange
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New York: Brent crude fell below $100 a barrel for the first time since June 2013, as falling Chinese imports bolstered concern that slower growth will worsen a global oil surplus. West Texas Intermediate (WTI) dropped to the lowest in almost eight months.
The European benchmark declined as much as 1.5% while WTI decreased 1.6%. Total Chinese imports slumped 2.4% in August, data from the Beijing-based customs administration show. Economic growth in China, the biggest oil consuming country after the US, will drop to 7.4% this year, the weakest pace since 1990, according to economist estimates compiled by Bloomberg.
Brent has tumbled 13% since 19 June as economies from Europe to Asia show signs of slowing while oil output climbs. Oil markets in the US and Europe face a glut amid constrained consumption and the recovery of supplies from Libya, the International Energy Agency, the Paris-based adviser to 29 nations, said last month.
“Global oil demand remains soft," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “China’s imports being down are another sign of softening. Any sign of a slowdown there has a major impact on the market."
Brent for October settlement decreased 99 cents, or 1%, to $99.83 a barrel on the London-based ICE Futures Europe exchange at 11:35 am in New York. Prices reached $99.36, the lowest intraday level since 1 May, 2013. The volume of all futures traded was 15% above the 100-day average for this time of day.
Chinese Imports
WTI for October delivery fell 98 cents, or 1.1%, to $92.31 a barrel on the New York Mercantile Exchange. Futures touched $91.80, the lowest level since 14 January. Volumes were 8.6% higher than the 100-day average. The US benchmark grade traded at a $7.52 discount to Brent, compared with $7.53 at the close on 5 September.
“The fundamentals have been bearish and eventually the fundamentals win out," Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts, said by phone. “We’re looking at a weak global market."
In China, imports fell for a second month as a property slump hurt domestic demand. The trade surplus climbed to a record of $49.8 billion in August as exports rose on the back of increased shipments to the US and Europe.
The 2.4% drop in imports compares with the median estimate for a 3% increase. Exports increased 9.4% from a year earlier, the Beijing-based customs administration said on Monday, compared with the 9% median estimate in a Bloomberg survey.
Libyan Output
Libya, which holds Africa’s biggest proven crude reserves, is pumping 740,000 barrels a day, National Oil Corp. spokesman Mohamed Elharari said by phone from Tripoli on Monday. That compares with a monthly average of 400,000 a day in July. The country produces light, sweet crude that’s similar in quality to Brent.
“The recovery in Libyan production is the number one reason for Brent’s decline," Emerson said. “There is more than enough light, sweet crude around."
Libya is “negatively affected" by falling oil prices and thinks that the Organization of Petroleum Exporting Countries (Opec) should take action to stem the decline, Elharari said. “It is important that fellow Opec states like Saudi Arabia take measures to preserve the price of the barrel," he said. Saudi Arabia was the biggest producer in the 12-member group last month while Libya was the smallest.
Saudi Arabia
“Saudi Arabia and the other members of Opec are going to have to examine the current market balance and decide on whether they want to take any action," Michael Cohen, an analyst at Barclays Plc in New York, said by phone.
Opec ministers kept their output target unchanged on 11 June in Vienna and are scheduled to meet next on 27 November.
October gasoline futures declined 3.86 cents, or 1.5%, to $2.5448 a gallon on the Nymex. Ultra low sulfur diesel for October delivery fell 2.21 cents, or 0.8%, to $2.7971 a gallon after touching $2.7882, the lowest level since 3 June, 2013.
The US expanded its air offensive in Iraq by conducting strikes for the first time in the western part of the country to protect the Haditha Dam.
The action is in support of Iraqi forces and Kurdish fighters seeking to reverse gains made by insurgents, who have rampaged through Opec’s second-biggest crude-oil producer since taking Mosul in June.
Ukraine Ceasefire
Ukraine said on Monday its army positions were being shelled during the ceasefire with pro-Russia rebels as the United Nations human rights chief said the conflict has claimed at least 3,000 lives since mid-April.
The European Union’s president Herman Van Rompuy said on Sunday on Belgium’s VRT television that the bloc is ready to review economic sanctions against Russia, which the EU and the US accuse of aiding the rebels, if the ceasefire holds. Russia is the world’s biggest energy-exporting country.
“Prices have fallen a lot since June," Kilduff said. “The geopolitical concerns should stem losses. If not for the problems in Iraq, Ukraine and other places, prices would probably be much lower." Bloomberg
Grant Smith in London and Saleh Sarrar in Dubai also contributed to this story.
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