Brent crude fell below $80 a barrel for the first time in four years on speculation OPEC won’t eliminate a global supply glut.
Brent, used to price more than half the world’s oil, last traded below $80 on Sept. 29, 2010. The Organization of Petroleum Exporting Countries won’t cut its collective output when it meets in Vienna on Nov. 27, according to Kuwaiti Oil Minister Ali Al-Omair.
Oil plunged into a bear market last month, the result of a surge in shale drilling that has lifted U.S. production to a three-decade high as well as slowing growth in global demand. OPEC members Saudi Arabia and Kuwait have resisted calls to cut output while Libya, Venezuela and Ecuador have asked for action to prevent even lower prices.
“The evidence is abundant that OPEC needs to take oil off the market to support prices but there’s no evidence that they are going to take the action needed to accomplish that task,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “The oil market needs to be rebalanced. That’s what the drop in prices over the last four months shows in economic terms.”
Brent for December settlement fell $1.29, or 1.6 percent, to end the session at $80.38 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since Sept. 28, 2010. Futures earlier slipped as much as 2.3 percent to $79.81. The more-active January contract dropped 1.5 percent to close at $81.12.
West Texas Intermediate for December delivery declined 76 cents, or 1 percent, to close at $77.18 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Oct. 4, 2011. The U.S. benchmark closed at a $3.20 discount to Brent, the least since Oct. 20.
The U.S. Energy Information Administration cut its 2014 and 2015 crude price forecasts in its monthly Short-Term Energy Outlook today. The EIA trimmed its Brent crude estimate for next year to $83.42 from $101.67.
Saudi Arabia remains committed to seeking a stable oil price and speculation of a battle between crude producers “has no basis in reality,” Oil Minister Ali Al-Naimi said in Mexico.
OPEC said Saudi Arabia led declines in the group’s oil output last month. The kingdom’s production fell 69,900 barrels a day to a seven-month low of 9.603 million, OPEC said in a monthly report. The data are based on estimates from sources including analysts and media organizations. OPEC’s members pumped 30.253 million barrels a day, a decrease of 226,400 barrels, the largest since March.
Kuwait has no plans to cut its output, which is set to climb to 4 million barrels a day by 2020, Al-Omair said Nov. 10. It produced 2.85 million a day in October, on par with the United Arab Emirates and behind Saudi Arabia and Iraq among OPEC nations.
“There’s uncertainty about OPEC and whether it will or will not cut production at the Nov. 27 meeting,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said by phone. “They probably wouldn’t have to do that much to stabilize the market but until some action is taken there’s not a lot of upside for this market.”
Oil at $80 a barrel won’t stop BP Plc or Total SA from exploring and developing crude deposits, officials from the two companies said at a conference in Abu Dhabi this week. All projects under way now will go ahead with oil at $80 a barrel, said London-based BP Chief Executive Officer Robert Dudley. Total, based in Paris, can proceed with its projects at $80, Arnaud Breuillac, president of exploration and production, also said in Abu Dhabi.
Crude inventories in the U.S., the world’s biggest oil consumer, probably expanded by 1.1 million barrels in the week ended Nov. 7, a Bloomberg News survey shows before a government report tomorrow. Stockpiles probably increased to 381.3 million barrels, according to the median estimate in the Bloomberg survey of nine analysts before the Energy Information Administration’s report. That would be the highest since July.
December gasoline futures increased 0.34 cent to close at $2.107 a gallon on the Nymex. Ultra low sulfur diesel for December delivery fell 2.18 cents, or 0.9 percent, to end the session at $2.4469 a gallon.
Regular gasoline at U.S. pumps fell to the lowest level since December 2010. The average retail price dropped 0.3 cent to $2.923 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.