Brent Drops for a Second Day; Citigroup Lowers Forecast

Brent crude declined for a second day amid signs global markets are adequately supplied after Saudi Arabia exported the most oil in eight years.

Futures dropped as much as 0.8 percent in London as Citigroup Inc. said it’s “rescinding” expectations for higher prices amid progress toward an agreement over Iran’s nuclear program. Saudi Arabia exported more crude in September than in any month since November 2005, according to data from the Joint Organizations Data Initiative. Hedge funds became the least bullish on West Texas Intermediate in five months as U.S. inventories expanded.

“In the longer run the market is still bearish, with plentiful supplies,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “The market was a tad overbought from a fundamental perspective.”

Brent for January settlement fell as much as 97 cents to $107.53 a barrel on the London-based ICE Futures Europe exchange, and traded for $107.96 as of 1:45 p.m. local time. The European benchmark crude was at a premium of $13.89 to WTI. The spread narrowed on Nov. 15 for the first time in six days to $14.01 a barrel.

WTI for December delivery slid as much as 59 cents to $93.25 a barrel in electronic trading on the New York Mercantile Exchange. Last week prices capped a sixth weekly drop, their longest run of losses since 1998. The volume of all futures traded was about 41 percent below the 100-day average.

Saudi Supply

Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, pumped 10.12 million barrels a day of crude and shipped 7.84 million a day in September, statistics posted on the JODI website yesterday show. JODI is supervised by the Riyadh-based International Energy Forum and compiles data provided by member governments.

Saudi Arabia boosted exports in October by 300,000 barrels a day even as its production eased, a person with knowledge of the country’s supply policy said on Nov. 11, without providing total export data and asking not to be identified because the figures haven’t been officially released.

U.S. Inventories

In the U.S., the world’s biggest oil consumer, crude stockpiles rose to 388.1 million barrels in the seven days ended Nov. 8 as output surged to the highest rate since January 1989, the Energy Information Administration said last week. The EIA is the Energy Department’s statistical arm.

“Supply has been more than enough to cover demand, particularly in the U.S.,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “That, plus a diminished Middle East risk premium, has seen the supply situation being a dominant factor.”

Money managers reduced net-long positions on WTI by 4.3 percent in the week ended Nov. 12, according to data from the U.S. Commodity Futures Trading Commission. Long positions, or bets that prices will gain, slid for the 10th time in 11 weeks and short positions advanced to a six-month high.

“Bearish pressures” on the oil market are increasing and looking less likely to be derailed by potential supply disruptions, Citigroup said in an e-mailed report today. It forecast Brent will trade at $105 a barrel in the fourth quarter and $98 in 2014. Futures averaged $111.68 last year.

World powers will meet in Geneva on Nov. 20 for talks with Iran on its nuclear program, which the Persian Gulf nation says is for civilian energy and medical use. The U.S. and its allies say the government in Tehran is covertly seeking atomic-weapons capability.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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