Oil Falls to Lowest in Almost Six Years on Global GlutMark Shenk
Crude oil fell to the lowest in almost six years after OPEC Secretary-General Abdalla El-Badri said that there was about 1.5 million barrels a day of excess supply.
Oil slipped 1 percent in New York, reversing an intraday gain of 1.8 percent that followed comments by El-Badri that OPEC is open to talks with outside producers and insufficient investment could push crude prices to $200. A blizzard that may dump 2 feet of snow from New York to Boston bolstered diesel, often traded as a proxy for heating oil.
“El-Badri acknowledged that there’s about a 1.5 million-barrels-a-day surplus,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “It’s up to the market to decide whether that’s the critical factor or the possibility of OPEC-non-OPEC cooperation or the speculation that there could be $200 oil at some future date. It looks like the market decided.”
West Texas Intermediate for March delivery fell 44 cents to close at $45.15 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 11, 2009. The volume of all futures traded was 15 percent below the 100-day average at 2:52 p.m. Prices are down 53 percent from a year earlier.
Brent for March settlement slipped 63 cents, or 1.3 percent, to end the session at $48.16 a barrel on the London-based ICE Futures Europe exchange. Volume was 12 percent lower than the 100-day average. The European benchmark crude closed at a $3.01 premium to WTI.
Oil has slumped almost 60 percent since June as the Organization of Petroleum Exporting Countries resisted calls to cut output and the U.S. pumped at the fastest pace in more than three decades. Drillers in the U.S. have begun to idle rigs as falling prices make wells aiming to tap shale reserves unprofitable.
U.S. inventories climbed to the highest level for December since 1930, the American Petroleum Institute reported Jan. 23. Supplies increased 7.4 percent from a year earlier to 383.5 million barrels in December, the Washington-based API said in a monthly report. Production accelerated 16 percent to 9.12 million barrels a day, the highest level for any month since February 1986, according to the industry group.
The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.
An Energy Information Administration report on Jan. 28 is projected to show that U.S. crude inventories climbed for a third week, according to analysts surveyed by Bloomberg.
OPEC agreed at a Nov. 27 meeting to maintain its collective output target of 30 million barrels a day. Its 12 members pumped 30.2 million a day in December, exceeding that target for a seventh straight month, a Bloomberg survey of companies, producers and analysts shows.
Futures fell to their intraday lows as the election of the anti-austerity Syriza party in Greece bolstered concern about the European economy.
Greek Prime Minister-elect Alexis Tsipras’ mandate is now to confront the nation’s program of austerity, imposed in return for pledges of 240 billion euros in aid since May 2010. Tsipras, 40, has pledged to keep Greece within the euro area as he negotiates a writedown of Greek debt and eases budget constraints that were imposed in return for aid after the country’s economic collapse.
“The Greek vote weighed on the market overnight,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We’re getting some support from gasoil and heating oil because of angst about the storm. We’re going to see some very cold temperatures here over the next few weeks.”
Wind-driven snow falling as fast as 4 inches per hour is poised to bring travel and commerce to a standstill from New York to Boston. As much as 24 inches of snow may fall in New York, while Boston and eastern New England may see 36 inches, the National Weather Service said in its latest advisory.
Ultra-low sulfur diesel for February delivery slipped 0.69 cent, or 0.4 percent, to close at $1.6398 a gallon ion New York. Gasoline futures dropped 3.12 cents, or 2.3 percent, to settle at $1.3167.
Regular gasoline at U.S. pumps fell to the lowest level since April 2009. The average retail price slipped 0.2 cent to $2.033 a gallon Jan. 25, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.
Hedge funds and other money managers boosted bearish bets on WTI to the most since September 2010 in the week ended Jan. 20, the Commodity Futures Trading Commission reported on Jan. 23. Net-long positions shrank for the first time in three weeks.
Money managers cut net-long positions in Brent to 141,983 lots in the week to Jan. 20, the first reduction since the week that ended Dec. 23, according to data from ICE Futures Europe.