Crude Tumbles With Equities as Venezuela Fails to Achieve Deal

  • Saudi oil minister met Venezuelan counterpart Sunday in Riyadh
  • Vitol CEO says crude to stay between $40 and $60 for 10 years

Vitol CEO Sees Oil Priced Between $40 - $60 For a Decade

Oil dropped below $30 a barrel in New York as equities tumbled and no agreement emerged from Venezuela’s tour of crude-producing nations.

Futures fell 3.9 percent. No steps to shore up the market were announced after Saudi Arabian Oil Minister Ali al-Naimi met his Venezuelan counterpart Sunday in Riyadh. Speculators’ short positions on crude were near a record while longs were at the highest since June, increasing total wagers to unprecedented levels, data from the U.S. Commodity Futures Trading Commission show.

Oil is down 19 percent this year as Iran boosts exports after the removal of sanctions and U.S. crude supplies swell. Prices will remain below $60 a barrel for as long as 10 years as Chinese economic growth slows and the American shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group BV, the world’s largest independent oil trader.

"The reality is seeping back in that there isn’t going to be any production cutback outside of the U.S.," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. "There has to be some change in the oversupply picture and we aren’t getting that. There was another big increase in U.S. inventories last week and the Venezuelan oil minister didn’t come out of the meeting in Riyadh announcing an agreement to cut."

West Texas Intermediate for March delivery fell $1.20 to $29.69 a barrel on the New York Mercantile Exchange. It was the lowest close since Jan. 21. Total volume traded was 38 percent above the 100-day averageat 3:05 p.m.

Brent for April settlement dropped $1.18, or 3.5 percent, to $32.88 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $1.24 premium to the April WTI contract.

Equities Drop

U.S. shares retreated, joining a tumble in European and emerging market stocks. The Standard & Poor’s 500 Oil & Gas Exploration and Production Index lost as much as 4.3 percent before rebounding. Williams Cos., a pipeline company, and Chesapeake Energy Corp., were both down about 35 percent at 3:06 p.m., the biggest declines on the S&P 500.

Venezuela’s Oil Minister Eulogio Del Pino met al-Naimi after visiting Russia, Iran, Qatar and Oman on a tour to drum up support for a coordinated approach to stem the slide in prices. Six members of the Organization of Petroleum Exporting Countries and two non-OPEC producers would be open to attending an extraordinary meeting if one is called, the South American country said last week.

“Venezuela’s quest to broker talks between OPEC and non-OPEC was doomed from the very beginning,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “It just showed how desperate some of the oil-producing countries are now.”

Ample Stockpiles

U.S. stockpiles climbed above 500 million barrels to the highest level since 1930 in the week ended Jan. 29, according to data compiled by the Energy Information Administration. Supplies probably rose by 3.2 million barrels last week, according to a Bloomberg survey before an EIA report Wednesday. Gasoline inventories probably climbed while supplies of distillate fuel dropped.

March gasoline futures dropped 3.9 percent to 95.6 cents a gallon, the lowest close since December 2008. Diesel for March delivery declined 1.2 percent to settle at $1.0464.

Dramatic Increase

“It’s hard to see a dramatic price increase,” Vitol’s Taylor told Bloomberg in an interview. Oil is likely to bounce between $40 a barrel and $60 for the next decade, with a midpoint of $50, he said. The trading house also confirmed it had purchased crude from Iran after sanctions were lifted.

Money managers’ combined short and long positions in WTI rose to 497,280 futures and options contracts in the week ended Feb. 2, according to the CFTC. Shorts were near the all-time high while longs, or bets that prices will gain, climbed to the highest level since June, the data showed. In the Brent market, money managers increased net-long positions last week to the highest in data going back to January 2011, ICE Futures Europe data show.

Before it's here, it's on the Bloomberg Terminal.