Oil Falls Amid Signs Global Glut to Ebb Slowly, Gasoline Tumbles

  • Gasoline futures close at lowest since March 2009 on Nymex
  • Rigs targeting oil in the U.S. drop for 7th week: Baker Hughes

Crude extended last week’s decline on signs the global surplus will only gradually dissipate. Gasoline futures tumbled to the lowest level in more than six years.

West Texas Intermediate futures fell 2.9 percent. China reported the slowest economic growth since 2009, sending commodities lower. Saudi Arabia’s commercial crude stockpiles in August rose to the highest level since at least 2002, data from the Joint Organisations Data Initiative show.

“The one-two punch of oversupply and shaky Asian demand is putting downward pressure on the market,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. “The Chinese data could have been worse but was bad enough to raise demand concerns.”

Global markets have remained oversupplied as the boom in U.S. crude production slowly fades, leaving the nation’s stockpiles about 100 million barrels higher than the five-year seasonal average. The Organization of Petroleum Exporting Countries continues to pump more than its collective quota even as members including Iran urge output cuts.

WTI Declines

WTI for November delivery, which expires Tuesday, fell $1.37 to $45.89 a barrel on the New York Mercantile Exchange. It’s the lowest close since Oct. 2. The volume of all futures traded was near the 100-day average. The more-active December future decreased $1.44 to $46.28.

Brent for December settlement declined $1.85, or 3.7 percent, to end the session at $48.61 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $2.33 to WTI for the same month.

While China’s gross domestic product growth beat estimates at 6.9 percent in the third quarter from a year earlier, that was still the slowest pace since 2009. Separate data showed industrial output last month rose 5.7 percent from a year earlier, compared with 6 percent projected in a Bloomberg survey.

U.S. drillers cut operations a seventh week. Rigs targeting oil in the U.S. fell by 10 to 595, Baker Hughes Inc. said on its website Friday. That’s the lowest in five years. The number of active rigs has declined by 80 since August.

"We’re down even though Baker Hughes showed yet another decline in the rig count," Bob Yawger, director of the futures division at Mizuho Securities USA in New York, said by phone. “We’re stuck in a tight range, between roughly $45 and $51. The market is stuck between the moving averages, with the 50-day below and the 100- and 200-day above."

The 200-day moving average for WTI stands at $50.75, while the 100-day is $49.65 and the 50-day is $44.86.

Saudi Arabia is delaying payments to government contractors as the slump in prices pushes the country into a deficit for the first time since 2009, according to three people with knowledge of the matter.

OPEC members should cut crude output to boost prices to a range of $70 to $80 a barrel, Iran’s Oil Minister Bijan Namdar Zanganeh said. “No one is happy” with current prices, Zanganeh told reporters in Tehran. World powers and Iran set the clock ticking Sunday on a landmark accord placing limits on the Islamic Republic’s nuclear work in return for access to oil and financial markets. The formal adoption of the deal means that all sides will have to begin delivering on the pledges they made three months ago.

Gasoline Rout

Gasoline futures for November delivery decreased 7.66 cents, or 5.8 percent, to $1.2514 a gallon, the lowest settlement since March 2009. Diesel for November delivery dropped 4.75 cents, or 3.2 percent, to $1.4491 a gallon, the lowest close since Aug. 26.

Regular gasoline at U.S. pumps slipped to the lowest level since February. The average retail price fell 0.5 cent to $2.257 a gallon Sunday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.
 
The gasoline crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, tumbled 21 percent.

“The gasoline crack is really getting stepped on,” Yawger said. “This is telling us that the gasoline market is even more oversupplied than that for crude, and that the demand outlook is bleak. Refiners are taking on the chin today as a result.”

Valero Energy Corp., the second-biggest U.S. independent refiner, was down 4 percent at 2:54 p.m., while Marathon Petroleum Corp. slipped 5.7 percent.

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