Oil fell, capping a fifth weekly loss on concern that OPEC’s refusal to cut production will worsen a global supply glut.
Brent and West Texas Intermediate extended their annual declines of more than 40 percent, the biggest since 2008, as the Organization of Petroleum Exporting Countries resisted supply cuts to defend market share while the highest U.S. production in three decades exacerbated a global glut. Trading volume headed for the lowest this year.
“The market is still reeling from oversupply,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s really hard to muster a substantial rally until we figure out how we are going to use all this oil.”
Brent for February settlement slipped 79 cents, or 1.3 percent, to $59.45 a barrel on the London-based ICE Futures Europe exchange, down 3.1 percent this week. The volume of all futures was 84 percent below the 100-day average as of 3:10 p.m., with much of Europe on holiday after Christmas.
West Texas Intermediate crude for February delivery fell $1.11, or 2 percent, to $54.73 on the New York Mercantile Exchange with volume 68 percent below average. Prices were down 3.2 percent this week. Trading reached 174,562 contracts at 2:49 p.m. The previous lowest volume this year was 244,240 on Aug. 25. Brent traded at a premium of $4.72 to WTI on the ICE.
Both grades gained more than 1 percent earlier on fighting in Libya and on a report that Saudi Arabia expects prices to rise. The state-run National Oil Corp. said today that several tanks were on fire at the Es Sider terminal as Islamist militias attacked Libya’s largest petroleum port. Saudi Arabia, OPEC’s biggest producer, is assuming an oil price of $80 a barrel for 2015, said John Sfakianakis, a former economic adviser to the country’s government.
U.S. crude stockpiles climbed 7.27 million barrels in the week ended Dec. 19, the most in two months, the Energy Information Administration said Dec. 24.
The gain left U.S. crude stockpiles at 387.2 million barrels, the highest level since June, according to data from the EIA, the Energy Department’s statistical arm.
OPEC, whose 12 members supply about 40 percent of the world’s oil, decided at a Nov. 27 meeting to maintain its production target at 30 million barrels a day. The group pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.
“We are still in a state of oversupply,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The disruption in Libya may contribute to Brent’s stabilization in the near term.”
The fighting in Libya caused crude output to decline to 352,000 barrels a day, Mohamed Elharari, the company’s spokesman, said yesterday. That compares with daily production of almost 1.6 million in 2011.
“Disruption to Libya’s oil production helps Brent to stay up and helps WTI to stay up too,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “We are seeing a little bounce back. The only thing we need to fear is profit-taking when prices go up.”
Retail prices for regular gasoline at the pump were below $2 a gallon at about 20,000 stations in the U.S. today, according to AAA. The most common price was $1.999. Retail gasoline averaged $2.324 nationwide yesterday, a five-year low, AAA said.