WTI Heads for Weekly Drop as Saudi Policy Seen Unchanged

West Texas Intermediate retreated from the biggest gain since September amid speculation a drop in Saudi Arabian oil supplies isn’t a signal that OPEC’s largest producer has decided to cut production. Brent slid in London.

Futures fell as much as 1.3 percent in New York and are poised for a fourth weekly decline. Saudi Arabia’s crude supplies to the market declined last month even as production increased, a person familiar with the kingdom’s oil policy said yesterday. The first case of Ebola was confirmed in New York City, spurring demand for haven assets including U.S. Treasuries. That hasn’t fed through into oil prices, according to Saxo Bank A/S.

The market’s reaction to the fall in Saudi supply underscores the focus on the Organization of Petroleum Exporting Countries before the group’s meeting next month. The highest U.S. crude output in almost 30 years helped drive oil futures into a bear market. While Libya’s OPEC governor called for the group to reduce output, producers including Kuwait signaled the slump in prices doesn’t warrant immediate cuts.

“The Saudis increased production, so there is no signal that they’ve changed their behavior with an eye on pushing prices back up,” Bjarne Schieldrop, chief commodity analyst in Oslo at SEB AB, said by phone. “The Ebola case in New York could also spark fears that restrictions will be put on international flights, potentially hurting jet fuel demand.”

Saudi Policy

WTI for December delivery dropped as much as 1.09 cents to $81 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.05 at 1:42 p.m. London time. The contract climbed $1.57 to $82.09 yesterday. The volume of all futures traded was about 25 percent below the 100-day average for the time of day. Prices are down 2.1 percent this week and 18 percent in 2014.

Brent for December settlement decreased as much as $1.21, or 1.4 percent, to $85.62 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $4.82 to WTI on ICE, compared with $4.10 at the end of last week.

Saudi Arabia supplied 9.36 million barrels a day to markets in September, said the person familiar with its policy, who asked not to be identified because he isn’t authorized to speak on the matter. The figure doesn’t include the amount of oil put into storage. Production was 9.7 million barrels a day last month, up from almost 9.6 million in August, the person said. That’s the same as OPEC reported in its most recent assessment on Oct. 10.

Unsold Barrels

The supply reduction reflects a weak market rather than a new output policy, according to Julian Lee, an oil strategist Bloomberg First Word. It indicates Saudi Arabia put unsold barrels into storage, he said.

WTI prices could fall to as low as $75 a barrel over the next three months, Bank of America Corp. analysts including Francisco Blanch in New York said in a report dated Oct. 23. Bloating crude inventories on the U.S. Gulf Coast may lead to an increase in supplies at Cushing, Oklahoma, where oil is delivered to settle NYMEX futures contracts, the bank said. WTI could rebound to $90 a barrel next year, due in part to slower growth in shale oil output, it said.

Ebola Diagnosis

The New York case of Ebola was the first diagnosed in the most populous U.S. city. The doctor, Craig Spencer, 33, is being treated in an isolation unit at Bellevue Hospital Center in Manhattan after returning from aid work in West Africa. At the same time, officials are monitoring those who were with him during a time when he traveled on the subway, went bowling and had close contact with three people.

While the diagnosis hasn’t had a direct impact on oil, the reaction in equities and U.S. Treasuries may have a negative effect on broader market sentiment, Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank, said by phone.

“It does show the impact this is having on the market, the unease that we continue to see cases popping up around the world,” he said. “One thing the market hates is the unknown.”

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