Brent Oil Falls to 4-Year Low Amid Doubts About OPEC Cut

Brent crude declined to its lowest in four years amid speculation OPEC will refrain from paring a global surplus. West Texas Intermediate rose from its lowest close in three years.

Brent slumped as much as 1.4 percent in London. Crude inventories in the world’s biggest oil consumer probably expanded by 2.35 million barrels, a fifth weekly increase, a Bloomberg News survey shows before an Energy Information Administration report today. Saudi Arabia’s Oil Minister Ali Al-Naimi is scheduled to attend a climate event in Venezuela starting tomorrow, according to embassy officials in Caracas.

Oil has slumped into a bear market as the largest producers in the Organization of Petroleum Exporting Countries resisted calls to cut output. Global supplies are climbing, with the U.S. pumping at the fastest pace in more than 30 years.

“Some in the market, myself included, are highly skeptical of OPEC making production cuts,” said Christopher Bellew, senior broker at Jefferies International Ltd., said by e-mail. “The schism splitting the organization between those who want higher prices and those who want to maintain production is the widest it’s been in years.”

Brent Slump

Brent for December settlement slid as much as $1.19 to $81.63 a barrel on the London-based ICE Futures Europe exchange, the lowest since Oct. 21, 2010. It traded for $82.42 as of 1:40 p.m. local time. Prices are down 26 percent in 2014. The European benchmark crude traded at a premium of $4.93 to WTI on ICE. The spread narrowed for the first time in a week yesterday to close at $5.63.

WTI for December delivery climbed 32 cents to $77.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.59 to $77.19 yesterday, the lowest close since October 2011. The volume of all futures traded was about 40 percent above the 100-day average for the time of day. Prices have decreased 21 percent this year.

U.S. distillate inventories, including heating oil and diesel, probably fell by 2.2 million barrels in the week ended Oct. 31, according to the median estimate in the Bloomberg survey of nine analysts. Gasoline supplies are projected to have dropped by 600,000 barrels.

U.S. Inventories

Crude stockpiles shrank by 640,000 barrels last week, the American Petroleum Institute in Washington reported yesterday, Bain Energy said. The industry group collects data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm.

Al-Naimi’s trip is reminiscent of the 1990s, when Saudi Arabia’s competition with Venezuela and Mexico to supply the U.S. Gulf Coast drove down prices, said Mike Wittner, the head of oil market research at Societe Generale SA in New York. To win the showdown against shale producers, the Saudis may be trying to bring OPEC’s smaller members in line before the group’s Nov. 27 meeting in Vienna, he said.

Saudi Arabian Oil Co., the state-owned producer, reduced its premium for next month’s sales of Arab Light crude to the U.S. Gulf Coast by 45 cents a barrel to the least since December, a company statement on Nov. 3 showed. Shipments of its largest crude stream will cost more compared with November for customers in Asia and Europe.

“Without geopolitical shocks, demand will be adequately met by supply,” said David Lennox, a resource analyst at consultant Fat Prophets in Sydney. “OPEC is the one that’s going to have to counter that. The U.S. isn’t going to slow production.”

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