West Texas Intermediate crude traded near a five-month low on signs markets are oversupplied despite an economic recovery in the U.S., the world’s largest oil user.
Futures were little changed today and for the week in New York, after a run of four weekly losses. U.S. crude inventories are at their highest in almost five months and 2.5 percent above year-ago levels, data from the Energy Department shows. Payrolls in the U.S. increased more than forecast in October, a sign that employers were optimistic the world’s biggest economy would weather the effects of the federal government shutdown, according to the Labor Department.
“For several weeks now we’ve seen higher supply and that weighs on the WTI price,” said Hans van Cleef, an energy economist at ABN Amro Bank NV in Amsterdam, who sees WTI weakening to average $90 a barrel next year. “That’s despite the pick-up in demand from the U.S. economic recovery. The economic picture is turning in the right direction in the U.S., but prices will decline even further because of oversupply.”
WTI for December delivery traded for $94.34 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange at 1:37 p.m. London time. It settled at $93.37 on Nov. 5, the lowest close since June 4. The volume of all WTI futures traded was 27 percent lower than the 100-day average.
Brent for December settlement traded 40 cents higher at $103.86 on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $9.58 to WTI. The spread was $9.26 yesterday, the narrowest closing level since Oct. 25.
The addition of 204,000 workers followed a revised 163,000 gain in September that was larger than initially estimated, Labor Department figures showed today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for a 120,000 advance. The jobless rate rose to 7.3 percent from an almost five-year low.
Prices may decline next week as crude inventories increase amid rising production, according to a Bloomberg survey. Sixteen of 25 analysts and traders, or 64 percent, predicted WTI will drop through Nov. 15. Five respondents projected a gain and four said prices will be unchanged.
WTI slid 0.6 percent yesterday amid concern the Federal Reserve may scale back stimulus, reducing demand for commodities. The U.S. economy expanded at a 2.8 percent annualized rate last quarter, Commerce Department data showed. That exceeded the median economist forecast for 2 percent growth and is more than a 2.5 percent gain in the second quarter.
Daily U.S. crude output climbed to 7.9 million barrels as of Oct. 18, the fastest rate since March 1989, according to the Energy Information Administration. It has since slipped to 7.86 million barrels a day. Stockpiles of crude increased to 385.4 million last week, the highest level since June 21.
“The clear trend in recent weeks has been a reasonably negative picture, with oil production building up and a reasonably disappointing start to the beginning of winter,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “We’ll have to see what happens in the next couple of weeks.”
Oil will trade between $100 and $110 a barrel for the rest of the year, a “comfortable” level for producers and consumers, the head of OPEC said yesterday.
The oil market is unlikely to become oversupplied, OPEC’s secretary-general, Abdalla El-Badri, said in Vienna yesterday.
Global demand for crude from the Organization of Petroleum Exporting Countries will fall by 1.1 million barrels a day to 29.2 million through 2018, the group said in its annual World Oil Outlook, citing a surge in North American shale production. OPEC’s 12 members pump about 40 percent of the world’s oil.
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