Brent crude oil extends biggest plunge since 2011 on glut; WTI nears $80
Brent fell as much as 2% to $83.37 a barrel, the lowest since Nov 2010
London: Brent crude oil extended its biggest one-day collapse in three years amid speculation Opec (Organization of the Petroleum Exporting Countries) will refrain from eliminating a glut while demand growth slows to the lowest since 2009. West Texas Intermediate (WTI) approached $80 a barrel.
Brent fell as much as 2% to $83.37 a barrel on the ICE Futures Europe exchange in London, the lowest since November 2010. On Tuesday it plunged 4.3%, the biggest one-day drop since September 2011, after the Paris-based International Energy Agency (IEA) cut its 2014 demand forecast. Iran, an Opec member, isn’t concerned about the slide in prices, according to its deputy oil minister.
“The market is currently in a state of panic as no one is prepared to put a hand under it," Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by email. “Opec’s lack of reaction to the latest sell-off could indicate they want to share the production cuts with the US."
Brent for November settlement, which expires on Thursday, was 72 cents lower at $84.32 a barrel on the London-based ICE Futures Europe exchange as of 1:10 pm local time. The more active December contract was down 77 cents at $84.64. The European benchmark crude traded at a premium of $3.19 to WTI on ICE, compared with $3.20 on Tuesday.
Crude Stockpiles
WTI for November delivery declined as much as $1.47 a barrel, or 1.8%, to $80.37 in electronic trading on the New York Mercantile Exchange, the lowest since June 2012. The contract dropped $3.90 to $81.84 on Tuesday. The volume of all futures traded was about three times the 100-day average for the time of day. Prices have decreased 18% this year.
Oil has collapsed into a bear market as shale supplies boost the US output to the most in almost 30 years and global demand growth weakens. The largest producers in the Opec are responding by cutting prices, sparking speculation that they will compete for market share rather than reduce supply.
The average regular gasoline price in the US fell 0.9 cents a gallon to $3.177, Heathrow, Florida-based motoring group AAA said on its website on Wednesday. That’s the lowest since February 2011.
US crude stockpiles probably climbed for a second week to 364.2 million barrels, according to the median estimate in a Bloomberg News survey of nine analysts before the Energy Information Administration report on Thursday. Production rose to 8.88 million a day in the week ended 3 October, the most since March 1986, said the energy department’s statistical arm.
Declining Prices
The period of declining prices will pass, said Roknoddin Javadi, Iran’s deputy oil minister and the managing director of National Iranian Oil Co., according to the state-run news agency Mehr. The Persian Gulf nation followed Saudi Arabia, Opec’s biggest producer, in cutting prices to Asia last week.
Opec, which supplies about 40% of the world’s oil, is raising output amid speculation its members are fighting for market share. The group pumped 30.47 million barrels a day in September, the most since August 2013, its monthly report on 10 October showed.
Global oil demand will rise by 650,000 barrels a day this year, the IEA said in its monthly report on Tuesday. That’s a reduction of 250,000 from a prior projection, and the weakest pace since 2009.
Bank of America Corp. lowered its 2015 forecast for Brent to $98 a barrel from $108, and its outlook for WTI to $90 from $96, according to an emailed report. Brent still has “strong support" at $85 a barrel because Opec will probably trim the supply surplus, while WTI may fall to $75 as new pipelines bring additional supply to the US storage hub at Cushing, Oklahoma, the bank said. Bloomberg
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