West Texas Intermediate crude slipped as OPEC said demand for its crude will fall amid rising output from non-members.
Prices slid 21 cents. The need for OPEC oil will decline by 300,000 barrels a day from a year earlier as producers led by the U.S., Canada and Brazil increase supplies, the group said in a report today. Futures fluctuated for most of the day after the Labor Department reported that fewer Americans filed applications for unemployment benefits last week.
“The OPEC report confirmed that global oil demand isn’t strong,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “We have ample supplies. The jobless claims were good and definitely suggested that the U.S. economy is getting better. It’s kind of mixed bag for today.”
WTI for February delivery settled at $93.96 a barrel on the New York Mercantile Exchange. Yesterday, they closed at the highest level since Jan. 2. The volume of all futures traded today was 3.4 percent below the 100-day average at 3:09 p.m.
Brent for February settlement, which expired today, fell 4 cents to end the session at $107.09 a barrel on the London-based ICE Futures Europe exchange. The more-active March contract dropped 52 cents to $105.75. Volume was 2.4 percent higher than the 100-day average.
The European benchmark crude was at a premium of $13.13 to WTI, compared with $12.96 yesterday.
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, said that supply from its 12 members tumbled to the lowest level since May 2011. Output slid by 20,000 barrels a day to 29.44 million in December amid declines in Iraq and Saudi Arabia. That’s less than the average of 29.6 million the group predicts will be required in 2014 and below the 30 million ceiling it reaffirmed in December.
Producers outside OPEC, led by the U.S., Canada and Brazil, will increase supplies by 1.27 million barrels a day to 55.38 million this year.
“Non-OPEC production continues to soar, and with global demand rising not at the same pace, OPEC will have to cut production,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston.
U.S. output climbed to 8.16 million barrels a day in the week ended Jan. 10, the highest level since July 1988, the Energy Information Administration reported yesterday. Output surpassed imports in October for the first time since 1995, the EIA said.
“The world is not running out of oil,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “OPEC is going to have to cut production to accommodate higher non-OPEC production. Global oil demand is not great.”
U.S. jobless claims dropped to 326,000 last week, the fewest since November, the Labor Department said. Applications for unemployment benefits decreased by 2,000 from a revised 328,000 in the prior period. The median forecast of 51 economists surveyed by Bloomberg called for 328,000.
The four-week average of jobless claims, a less-volatile measure than the weekly figure, declined to 335,000 from 348,500 the week before.
“The growth is basically led by the developed world, and it’s not helpful for commodities,” O’Grady said.
Europe is days from suspending a ban on reinsuring tankers hauling Iranian oil, a measure that helped cut the nation’s crude exports by more than 50 percent when it was implemented.
The six-month relaxation starts Jan. 20 and will allow companies following European Union law to reinsure tankers shipping Iran’s oil to India, China, Japan, South Korea, Turkey and Taiwan, an EU official told reporters in Brussels today, speaking on condition of anonymity because he wasn’t authorized to be quoted by name.
The step affects most of the world fleet because 90 percent of all merchant vessels are covered by members of the London-based International Group of P&I Clubs. Iran’s oil exports plunged to about 1 million barrels a day last year from 2.5 million before sanctions started in 2012, according to the White House.
“There will be Iranian oil coming into the global market,” Flynn said.
Iranian production reached 2.68 million barrels a day in December, according to data compiled by Bloomberg.
Implied volatility for at-the-money WTI options expiring in March was 17.8 percent, down from 18.4 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 455,978 contracts at 3:09 p.m. It totaled 670,669 contracts yesterday, 28 percent higher than the three-month average. Open interest was 1.62 million contracts.
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