West Texas Intermediate crude fell to the lowest level in more than four years after nations supplying a third of the world’s oil failed to pledge output cuts before this week’s OPEC meeting.
Venezuela, Saudi Arabia, Mexico and Russia said they plan to start quarterly monitoring of oil prices. Today’s talks in Vienna didn’t result in any joint commitment to reduce supplies, said Igor Sechin, who runs Russian state oil producer OAO Rosneft.
“Even those four countries are not agreeing to any kind of cut, and the last thing the Saudis want is to be the ones doing all the cutting,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “You have to get an above 2-million-barrel cut from OPEC to stabilize the market.”
WTI for January delivery fell $1.69, or 2.2 percent, to $74.09 a barrel on the New York Mercantile Exchange, the lowest settlement since September 2010. The volume of all futures was 21 percent below the 100-day average.
Prices were little changed after the American Petroleum Institute released its inventory data. The API reported that U.S. crude supply grew by 2.8 million barrels last week, ForexLive said on Twitter.
Brent for January settlement lost $1.35, or 1.7 percent, to $78.33 a barrel on the London-based ICE Futures Europe exchange. Volume was 1.4 percent below the 100-day average. Brent’s premium to WTI was $4.24.
Crude prices plunged into a bear market this year amid the highest U.S. oil production in more than three decades and signs of slower demand growth. Speculation that OPEC’s leading producers were more interested in preserving market share than propping up prices contributed to the rout.
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, will meet in two days in Vienna to assess its collective output. The 20 analysts surveyed last week by Bloomberg were divided, with half predicting a cut and the rest no action.
“It’s certainly possible that if there is absolutely nothing that comes out of OPEC, you are going to see the downward trend resume, probably getting to $60 at least,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion. “No one knows what OPEC is going to do.”
Russia, which isn’t a member of OPEC, wouldn’t need to cut production if oil fell to $60 a barrel, according to Sechin.
“Russia is basically saying that we are going to continue to pump oil no matter how low the price is,” said Zahir. “They are throwing some fuel on the fire.”
OPEC produced 30.97 million barrels a day in October, exceeding its 30 million target for a fifth month, according to data compiled by Bloomberg.
A coordinated output cut by OPEC is inevitable, Deutsche Bank AG said in a report earlier today.
“An examination of oil market fundamentals suggests that a coordinated cut in OPEC production is inevitable,” the bank said in an e-mailed report. Brent may move back to $87 a barrel early next year if OPEC announces a “credible reduction,” the bank said.
The group is unlikely to make a reduction large enough to remove market oversupply, Citigroup Inc. said.
“Absent a convincing cut, Citi expects oil prices to resume their slide,” analysts including Seth Kleinman said in a report.
OPEC is considering exemptions for three nations from any potential oil-production cuts, according to two people with knowledge of the proposal said. Iraq, Iran and Libya wouldn’t have to reduce supplies should the group agree to cut output.
U.S. oil futures rallied earlier after U.S. gross domestic product rose at a 3.9 percent annualized rate last quarter, up from an initial estimate of 3.5 percent.
“The GDP number came in strong and it’s feeding into the expectation that oil demand in the U.S. will rise,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “OPEC is over-producing and needs to make a significant cut.”
U.S. crude inventories rose 500,000 barrels last week, a Bloomberg survey showed before the Energy Information Administration’s report tomorrow. The refinery utilization rate increased to 91.5 percent, the survey showed.