West Texas Intermediate crude extended its rebound from below $80 a barrel as Goldman Sachs Group Inc. said the market isn’t oversupplied. Brent advanced in London.
Futures rose as much as 2.1 percent in New York, rallying for a second day from a 27-month low of $79.78 a barrel. Prices are still headed for a third weekly loss, having moved into a bear market amid speculation that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries will hold off from supply cuts. The decline is “too much, too early” because a crude glut is yet to materialize, according to Goldman Sachs.
Oil is paring its collapse as banks including BNP Paribas SA and Bank of America Corp. predict the rout may be over. They’re counting on OPEC to reduce output as the U.S. pumps the most oil in almost 30 years and world demand growth slows. Saudi Arabia and Kuwait indicated the price fall doesn’t warrant immediate production cuts, while Iraq plans to increase exports next month.
“Prices have likely overshot to the downside,” Jeffrey Currie, Goldman’s head of commodities research in New York, said in a report e-mailed today. “This leaves us near-term constructive, despite being long-term bearish.”
WTI for November delivery gained as much as $1.75 to $84.45 a barrel in electronic trading on the New York Mercantile Exchange and was at $83.57 at 1:37 p.m. London time. The contract climbed 92 cents to $82.70 yesterday, the first gain in four days. Prices are down 2.6 percent this week and 15 percent in 2014.
Brent for December settlement rose 62 cents, or 0.7 percent, to $86.44 a barrel on the London-based ICE Futures Europe exchange. The November contract expired yesterday after advancing 69 cents to $84.47. The European benchmark crude traded at a premium of $3.60 to WTI for December on ICE, compared with a front-month spread of $4.39 at the end of last week.
“The ‘supply glut’ is not yet here today, it exists in expectations,” Goldman said in a report. “The recent sell-off in oil has been mostly driven by positioning based upon expected fundamental shifts, as opposed to currently observable shifts.”
The lower prices go, the tighter the balance between supply and demand will become, Goldman said. With every 10 percent drop in oil prices, consumption grows by 0.15 percent, the bank estimated. Brent crude’s slump of almost 30 percent from its June peak might stimulate additional demand of almost 500,000 barrels a day, it said.
This demand response means “pricing in the future can be self-negating,” the analysts wrote. Dubai crude gained this week as more Asian buyers entered the market, the bank said.
The number of supertankers sailing toward China, the world’s second-largest importer, has surged to a nine-month high, with 80 very large crude carriers currently heading there, according to IHS Fairplay vessel-tracking signals compiled by Bloomberg at about 10 a.m. today. Supertanker cargoes headed for Japan are the highest since December, while those to South Korea and India also climbed.
Crude inventories in the U.S., the world’s biggest oil consumer, expanded by 8.92 million barrels to 370.6 million in the week ended Oct. 10, the Energy Information Administration reported yesterday. That’s the highest level since July and more than three times the median 2.45 million gain forecast in a Bloomberg News survey of 10 analysts.
Production accelerated for a second week to 8.95 million barrels a day, the most since June 1985, according to the EIA, the Energy Department’s statistical arm.
Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, plans to raise November exports from the Basrah Oil Terminal in the south by 400,000 barrels a day to 2.83 million, according to a preliminary crude loading program. That’s the highest export volume since at least 2012, when Bloomberg started tracking data.
Iraq’s total exports, including shipments from the Kurdish region in the north, should rise to 3 million barrels a day next month, 600,000 higher than the average in August and September, Zug, Switzerland-based consultants Petromatrix GmbH said in a report yesterday.