Brent crude fell near to a five-year low as OPEC said it expects demand for its crude next year to be the lowest since 2003. West Texas Intermediate also sank.
Futures slid as much as 2.2 percent in London. The Organization of Petroleum Exporting Countries lowered its estimate for demand for its crude in 2015 by about 300,000 barrels a day to 28.9 million. Crude could fall as low as $40 a barrel amid a price war or if divisions emerge in OPEC, said an official at Iran’s oil ministry. The U.S. Energy Information Administration reduced its price forecasts for next year while also downgrading its production outlook for a second month.
Brent collapsed 15 percent since OPEC agreed to leave its production ceiling unchanged on Nov. 27, resisting calls from members including Venezuela to cut output to stabilize prices. Saudi Arabia and Iraq this month deepened discounts on crude exports to their customers in Asia, bolstering speculation that group members are fighting for market share.
“I can see no news that would give any reason to buy oil at the moment,” Christopher Bellew, senior broker at Jefferies International Ltd., said by e-mail.
Brent for January settlement decreased as much as $1.45 to $65.39 a barrel on the London-based ICE Futures Europe exchange and was at $65.46 at 2:03 p.m. local time. The contract traded as low as $65.29 yesterday, the weakest since September 2009. The European benchmark crude was at a premium of $3.28 to WTI.
WTI for January delivery fell as much as $1.73, or 2.7 percent, to $62.09 a barrel in electronic trading on the New York Mercantile Exchange. It tumbled yesterday to as little as $62.25, the lowest since July 2009. The volume of futures traded was about 19 percent below the 100-day average for the time of day.
Demand for OPEC’s crude will slump to 28.92 million barrels a day next year, according to the group’s monthly oil market report. That’s below the 28.93 million required in 2009, and the lowest since the 27.05 million a day OPEC supplied in 2003, the group’s data show.
OPEC pumped 30.56 million barrels a day in November, exceeding its collective target of 30 million for a sixth straight month, a Bloomberg survey of companies, producers and analysts showed.
“Any break in OPEC solidarity or price war will lead to an enormous price-dive shock,” Mohammad Sadegh Memarian, head of petroleum market analysis at the Oil Ministry in Tehran, said yesterday. Iran, hobbled by economic sanctions over its nuclear program, wants to raise production to 4.8 million barrels a day once the curbs are removed, he said at a conference in Dubai.
WTI will average $62.75 a barrel in 2015, compared with a November projection of $77.75, the Energy Information Administration said yesterday. Brent may trade at $68.08, down from an earlier estimate of $83.42, according to the Energy Department’s statistical arm.
“As we move out in time the markets will start to rebalance and we’ll see prices firm up a little bit,” Adam Sieminski, administrator of the EIA, said in an interview on Bloomberg Television’s “Surveillance” with Brendan Greeley, Tom Keene, and Scarlet Fu. “I don’t think we’re going to get back to the over $100+ oil that we had for the last three years.”
The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota. Output advanced to 9.08 million barrels a day through Nov. 28, the fastest rate in weekly records that started in January 1983, EIA data showed.
Crude inventories in the country, the world’s biggest oil consumer, expanded by 4.4 million barrels last week, the industry-funded American Petroleum Institute reported yesterday, according to Anthony Headrick, an analyst at CHS Hedging. Government data today may show stockpiles shrank by 2.7 million, based on the median estimate in a separate Bloomberg survey of eight analysts.