OIL PRICES: ABOVE $45 YET
WSJ wrote, oil prices fell to touch a three-month intraday low Monday and closed with slight losses as a brief boost from the U.S. presidential election continues giving way to revived concerns about oversupply.
Light, sweet crude for December delivery settled down 9 cents, or 0.2%, at $43.32 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 19. U.S. oil fell as low as $42.20 a barrel, the lowest intraday price since mid-August, before a rebound throughout the afternoon. Brent, the global benchmark, fell 32 cents, or 0.7%, to $44.43 a barrel, its lowest settlement since Aug. 10.
Most of the negativity comes in one way or another by the Organization of the Petroleum Exporting Countries, analysts said. Most remain deeply skeptical that OPEC will be able to cut production to between 32.5 million and 33 million barrels a day, as it proposed in late September.
Several members and potential ally Russia have all increased production dramatically in just the less than two months since then. It demonstrates how aggressively competitive for customers and how reliant on oil revenue those countries, undermining the chances of cooperation that has repeatedly lifted oil prices from lows throughout 2016, analysts said.
"That narrative has finally run its course. Finally, no one believes OPEC will get it together," said Stephen Schork, editor of energy trade publication the Schork Report.
Oil did pare losses and briefly traded at gains in the afternoon. Reports of OPEC members trying to resolve differences in a push to complete a deal on production cuts likely encouraged bearish traders to get out of the market, brokers said. More money managers have gone into bearish, or short bets, in recent weeks, and they may be apt to bail quickly, sending prices higher, if OPEC gets on course to complete a deal when it meets in Vienna on Nov. 30, they said.
"At the end of the day, you have a lot of shorts in the market, and that's going to increase the volatility at any given moment," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.
With OPEC members staking out claims to their share of the market, the cartel increased production to 33.64 million b/d in October, according to Germany's Commerzbank. This has caused global oversupply to reach 950,000 b/d and means that OPEC will have to cut more production than anticipated.
Other market watchers believe that OPEC should abandon its pledge to cut production as it becomes more apparent that the proposed cuts are almost impossible to impose and enforce.
Bjarne Schieldrop, commodities analyst at Sweden’s SEB bank, said that lower oil prices have meant that OPEC has created more demand for its oil. He added that with Libya and Nigeria on the verge of bringing significant additional volumes to the market, it would make more sense to postpone any cuts for now and revisit the situation in 2017.
“In our view it is probably a better strategy for OPEC to let its production rise to its natural level [of between 35.5 to 36 million b/d] and let the oil price stay muted for a little while longer, thus avoiding reactivating U.S. shale oil production too early,” he said.
U.S. oil producers are already responding. They keep putting more rigs into drilling fields and their production, which has been in steady decline for months, rose 2% in the week ended Nov. 4, the U.S. Energy Information Administration said last week.
Also the dollar is making a strong move higher since the election. The Wall Street Journal Dollar Index, which tracks the buck against 16 other currencies, is up another 0.8% Monday. A stronger U.S. currency makes dollar-traded oil more expensive for foreign buyers, and so its price tends to fall as the dollar rises.
Several other markets, including metals, equities and bonds, have also rallied since the election, and oil’s break from those markets so decisively lower demonstrates how concerned oil traders are about oversupply, analysts said. They also pointed to front-month contracts falling further than longer-term futures, which is also typically a sign of glutted markets.
"That's all bearish news," said Jim Ritterbusch, president of energy-advisory firm Ritterbusch Associates. Renewed, public commitment from OPEC may be the only catalyst that could staunch losses in the coming weeks, he added. "OPEC really hasn't come out yet with a strong statement that they are going to be able to patch a deal together."
Gasoline futures lost 2.75 cents, or 2.1%, to $1.2778, the lowest settlement since Sept. 1 after a nine-session losing streak. Diesel futures lost 1.57 cents, or 1.1%, to $1.3855 a gallon, its lowest settlement since Sept. 14.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.