WTI Oil Extends Bear Market Tumble on Global Glut; Brent Slumps

U.S. Oil Production
A worker walks through an Anadarko Petroleum Corp. hydraulic fracturing site north of Dacono, Colorado. 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. Photographer: Jamie Schwaberow/Bloomberg

West Texas Intermediate crude tumbled further into a bear market amid signs of a global glut. Brent, the benchmark grade for more than half the world’s oil, traded close to a four-year low.

The U.S. crude slumped as much as 2.5 percent to $83.59 a barrel in New York, the lowest since July 2012. It closed yesterday more than 20 percent below its June peak, a common definition of a bear market. Brent is down 23 percent over a similar period and retreated as much as 2.2 percent to $88.11 in London, the lowest since Dec. 1, 2010.

The world’s two most-traded crude futures are collapsing because demand growth is slowing at a time when output is expanding from countries including the U.S. and Russia, the largest suppliers outside OPEC. The Organization of Petroleum Exporting Countries increased oil production by the most in almost three years last month.

“It’s been a massive sell-off,” Thina Saltvedt, an analyst at Oslo-based Nordea Markets, said by phone. “There are no trigger points to drive prices up. The Asian market is flooded with oil. There are more and more signs that OPEC doesn’t cooperate well these days, and it doesn’t look good if OPEC isn’t willing to tighten things up.”

OPEC Output

WTI fell 1.8 percent to $84.21 a barrel as of 1:37 p.m. London time. The contract decreased 1.8 percent to $85.77 yesterday, the lowest close since December 2012.

Brent for November slid 98 cents to $89.07 a barrel on the London-based ICE Futures Europe exchange. It’s poised for a third weekly loss. The European benchmark crude traded at a premium of $4.83 to WTI, compared with $2.57 on Oct. 3.

OPEC increased output by 402,000 barrels a day in September to 30.47 million, the group said in its monthly oil market report today. It was the biggest monthly gain since November 2011 and the largest production in more than a year. The organization predicted demand will accelerate in the next few months.

Saudi Arabia and Iran, both OPEC members, are discounting their main crude export grades to Asian buyers by the most in almost six years, prompting speculation some OPEC nations are competing for market share.

U.S. Surge

U.S. oil output 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 in the week to Oct. 3, the EIA, the Energy Department’s statistical arm, said on Oct. 8.

Russia increased output 0.7 percent to 10.61 million barrels a day last month, according to preliminary data from CDU-TEK, which is part of the Energy Ministry. The figure is within 0.3 percent of the post-Soviet record in January and is for crude and condensates, a type of oil that yields a greater proportion of high-value fuels.

State-run National Iranian Oil Co. cut official selling prices of its crude to buyers in Asia for November, two people with knowledge of the pricing decision said yesterday. The decrease came a week after Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008.

OPEC’s 12 members will probably announce a cut to either its 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.

Growth Cuts

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.

“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.”

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