OIL PRICES DOWN
West Texas Intermediate extended its slump into a bear market amid speculation that rising global oil supplies will be more than enough to meet slowing demand. London's Brent traded at the lowest price since December 2010.
Futures fell as much as 2.5 percent in New York, set for the biggest weekly drop since June 2012. The shale boom boosted U.S. production while the Organization of Petroleum Exporting Countries pumped the most oil in 13 months. Saudi Arabia reduced prices for November exports to Asia to a six-year low as the IMF downgraded its global growth outlook.
"We look to be in a capitulation phase in the oil market where investors are acquiescing to the reality of the supply overhang," Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone today. "The trigger was the news that Saudi Arabia was cutting prices. We're certainly into the region where OPEC may consider acting."
WTI for November delivery declined as much as $2.18 to $83.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.25 at 2:42 p.m. Singapore time. The contract decreased $1.54 to $85.77 yesterday, the lowest close since December 2012. Prices, down 6.1 percent this week, are more than 20 percent below a recent peak, meeting a common definition of a bear market.
Brent for November settlement slid as much as $1.94, or 2.2 percent, to $88.11 a barrel on the London-based ICE Futures Europe exchange. It's poised for a third weekly loss. The European benchmark crude, also in a bear market, traded at a premium of $4.68 to WTI, compared with $2.57 on Oct. 3.
WTI has declined 14 percent this year amid accelerating output from exporters including Russia, which is producing near a post-Soviet record. OPEC, responsible for about 40 percent of the world's oil supply, pumped 30.935 million barrels a day last month, a Bloomberg survey of producers and analysts show.
The 12-member group will probably announce a cut to either their 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.
Price cuts announced last week by Saudi Arabia fueled speculation that the world's largest crude exporter would let oil fall rather than cede market share to rivals in OPEC. That's misguided, according to UBS AG and BNP Paribas SA. Brent is below a band of $95 to $110 a barrel endorsed by Oil Minister Ali Al-Naimi, ensuring the country will curb output, they said.
U.S. oil production 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 million barrels to 361.7 million, the Energy Department's statistical arm said on Oct. 8.
The International Monetary Fund said on Oct. 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 Sept. 11.
WTI will probably extend its slide next week, a separate Bloomberg survey shows. Fourteen of 28 analysts and traders predict futures will drop though Oct. 17, while eight said prices will climb.
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AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.