WTI, Brent Post Weekly Declines as Global Supplies RiseMark Shenk
West Texas Intermediate crude pared the biggest weekly drop since January amid signs of a global glut. Brent, the benchmark for more than half the world’s oil, gained after reaching a four-year low in intraday trading.
WTI closed yesterday more than 20 percent below its June peak, a common definition of a bear market. Brent is down 22 percent from the June high. Both crudes settled higher for the first time in four days after falling more than 2 percent during trading today.
The world’s two most-traded crude futures are collapsing because demand growth is slowing at a time when output is expanding from countries including the U.S. and Russia, the largest suppliers outside OPEC. The Organization of Petroleum Exporting Countries increased oil production by the most in almost three years last month as Libyan output surged.
“The market is catching its breath after a week of collapse,” Mike Wittner, the head of oil market research at Societe Generale SA in New York and the third-most accurate forecaster for WTI among analysts ranked by Bloomberg in the past eight quarters, said by phone. “The fundamentals are weak but don’t justify this. It’s concern about OPEC that’s got the market rattled.”
WTI for November delivery rose 5 cents to settle at $85.82 a barrel on the New York Mercantile Exchange. Futures fell 4.4 percent this week after dropping 4.1 percent last week. The contract touched $83.59 today, the lowest intraday price since July 3, 2012. The volume of all futures traded was 46 percent above the 100-day average at 3:02 p.m.
Brent for November settlement gained 16 cents to end the session at $90.21 a barrel on the London-based ICE Futures Europe exchange. The contract reached $88.11, the lowest since December 2010. It slipped 2.3 percent this week, the third straight weekly decline. Volume was 35 percent higher than the 100-day average. The European crude closed at a $4.39 premium to WTI, the most since Sept. 25.
The 14-day relative strength index for Brent was 20.7328 today and has been below 30 since Sept. 30, according to data compiled by Bloomberg. The 14-day RSI for WTI slipped to 28.8204. An RSI below 30 typically signals a market is oversold.
“These markets are tremendously oversold,” Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston, said by phone. “Even in the most bearish markets there’s an occasional bounce, while bullish markets retreat at some point. A pause doesn’t mean we can’t drop to $80 next week, or for that matter rebound.”
OPEC increased output by 402,000 barrels a day in September to 30.47 million, the group said in its monthly oil market report today. It was the biggest monthly gain since November 2011 and the largest production in more than a year. The organization predicted demand will accelerate in the next few months.
“The market’s very weak because there’s considerable oversupply,” Amrita Sen, chief oil market analyst at consultants Energy Aspects Ltd. in London, said by phone. “There’s no sign from OPEC that they’re cutting back.”
Saudi Arabia and Iran, both OPEC members, are discounting their main crude export grades to Asian buyers by the most in almost six years, prompting speculation that some OPEC nations are competing for market share.
State-run National Iranian Oil Co. cut official selling prices of its crude to buyers in Asia for November, two people with knowledge of the pricing decision said yesterday. The decrease came a week after Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008.
“The potential that the Saudi-Iranian cuts will spiral into a full-scale fight for market share are a major worry,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “We’ll have to see if Iraq follows with an OSP cut as well.”
U.S. oil output increased to 8.88 million barrels a day last week, the most since March 1986, according to the Energy Information Administration. Crude inventories in the world’s biggest oil consumer gained by 5.02 million barrels to 361.7 million in the week ended Oct. 3, the EIA, the Energy Department’s statistical arm, said on Oct. 8.
Russia increased output 0.7 percent to 10.61 million barrels a day last month, according to preliminary data from CDU-TEK, which is part of the Energy Ministry. The figure is within 0.3 percent of the post-Soviet record in January and is for crude and condensates.
The International Monetary Fund said on Oct. 7 that the global economy will expand by 3.8 percent in 2015, down from a July projection of 4 percent. The International Energy Agency in Paris lowered its oil-demand forecasts for this year and next in its monthly report on Sept. 11.
“There’s a little drama fatigue in the market,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We’re going to probably trade around the bottom here for a bit.”
November gasoline futures decreased 1.74 cents, or 0.8 percent, to close at $2.2575 a gallon on the Nymex. It was the lowest settlement since Nov. 26, 2010. Pump prices fell 1.4 cents to $3.24 a gallon nationwide yesterday, the least expensive since December, according to AAA, the largest U.S. motoring group.
Ultra low sulfur diesel for November delivery rose 2.36 cents, or 0.9 percent, to settle at $2.5602 a gallon. It touched $2.5035 during the session, the lowest intraday price since Jan. 10, 2011.