Crude oil dropped to the lowest level in more than five years after the United Arab Emirates said OPEC won’t rein in production in response to the slump.
The Organization of Petroleum Exporting Countries will refrain from curbing output even if prices fall as low as $40 a barrel, U.A.E. Energy Minister Suhail Al-Mazrouei said. Prices have slipped about 20 percent since OPEC decided against cutting production to tackle the glut at a Nov. 27 meeting. The group has pumped more than its output target of 30 million barrels a day for the last six months.
Futures are poised to fall below half where they were six months ago, according to a Bloomberg survey today. Oil slid into a bear market this year amid the highest U.S. production in three decades and slowing growth in global consumption.
“The elements that brought us down this far haven’t changed,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The move lower should extend downward. The bottom of this move isn’t in sight yet.”
West Texas Intermediate for January delivery declined $1.90, or 3.3 percent, to $55.91 a barrel on the New York Mercantile Exchange. It’s the lowest settlement since May 2009. Total volume was 46 percent above the 100-day average at 2:51 p.m. WTI has dropped 43 percent this year.
Brent for January settlement slipped 79 cents, or 1.3 percent, to end the session at $61.06 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since July 2009. The grade has fallen 45 percent in 2014. Volume was 4 percent above the 100-day average. The North Sea oil closed at a $5.15 a barrel premium to WTI, the most in six weeks.
The European benchmark will slide to as low as $50 a barrel in 2015, according to the median in a Bloomberg survey today of 17 analysts, down from the $115.71 a barrel high for the year on June 19. The grade has already collapsed 47 percent since then and needs to fall further before producers clear the current glut, said five out of six respondents who gave a reason.
OPEC will stand by its decision not to cut output, the U.A.E.’s Al-Mazrouei told Bloomberg yesterday at a conference in Dubai. The group will wait at least three months before considering an emergency meeting to discuss output again, he said.
“We are not going to change our minds because the prices went to $60 or to $40,” Mazrouei said. “The market will stabilize itself.”
OPEC pumped 30.05 million barrels a day in November, according to data from analysts and media organizations compiled by the group in a report Dec. 10. That’s 1.73 million barrels a day more crude than the world needs from the exporters in the first quarter, according to its own estimates.
“We have a global supply glut and economic conditions in Europe and China continue to worsen so prices will remain under pressure,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “I don’t know where the bottom will be.”
The group decided last month to keep output unchanged to protect OPEC’s market share, even if it has a negative effect on crude prices, the official Kuwait News Agency reported yesterday, citing Oil Minister Ali al-Omair.
“We’ve got an epic battle of the wills,” Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania, said by phone. “The Saudis, Kuwaitis and the rest of that bloc are showing no sign of backing down.”
An increase of about 6 million barrels a day in non-OPEC supply, from countries including the U.S. and Russia, together with speculation in oil markets, triggered the recent drop in prices, OPEC Secretary-General Abdalla El-Badri said yesterday at the Dubai conference.
“It’s not logical nor fair to ask OPEC to reduce their production and not ask the other producers to stop their expected growth in supply,” Mazrouei said today on Twitter.
The U.S. pumped 9.12 million barrels a day in the period week Dec. 5, the most in weekly Energy Information Administration started in 1983. The gain came as horizontal drilling and hydraulic fracturing unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.
“It appears at least that OPEC is willing to let things sink until the other side bails,” Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts, said by phone.
Futures gained earlier today on signs that Libyan and Nigerian output will decline.
Libya declared force majeure, which excuses a supplier from meeting its delivery commitments because of events beyond its control, at the ports of Es Sider and Ras Lanuf, NOC said in a statement on its website Dec. 13. Output will be halted at some oil fields because of armed clashes nearby, it said.
Nigerian oil workers’ unions Pengassan and Nupeng, who are demanding changes to the country’s oil industry, instructed members to stop all work at facilities including oil platforms and export terminals.
Libya and Nigeria together produced 2.76 million barrels a day of crude oil last month, according to Bloomberg estimates. The African countries were among eight OPEC members who supported an output cut on Nov. 27, according to five people briefed on the meeting.
Gasoline futures slipped 2.09 cents, or 1.3 percent, to $1.5764 a gallon on the Nymex, the lowest close since May 2009. Diesel dropped 1.43 cents, or 0.7 percent, to $2.0017, the lowest settlement since August 2010.
Regular gasoline at the pump declined 1.4 cents to $2.545 a gallon yesterday, the least expensive since October 2009, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.
“It’s the same old, same old,” Schork said. “There’s no reason to buy the stuff right now.”