Oil Slides From 15-Month High on Russia Comments, Nigeria Prices

  • Russia can increase crude production “significantly”: Sechin
  • Nigeria cut crude prices in order to regain oil market share

Will OPEC Follow Through With Its Production Cut?

Oil declined from a 15-month high as Russia’s largest oil company said the country could boost production and Nigeria lowered prices for its crude.

Futures fell 2.3 percent in New York on Thursday after settling at the highest price since July 2015 on Wednesday. The head of Rosneft PJSC said Russia is capable of raising production "significantly," and Nigeria lowered prices for its oil in a bid for market share. The dollar strengthened, further weighing on commodity prices.

Oil has traded near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries will be able to implement an accord to reduce output when it gathers at an official meeting in November. A committee will meet later this month to try to resolve differences over how much individual members should pump.

Russia has capacity to add as much as 200 million metric tons a year, or 4 million barrels a day, if there’s demand, and technological and economic conditions allow, Igor Sechin, chief executive officer of Rosneft, Russia’s largest oil company, said Thursday. “In the future, Russia can significantly increase oil production,” he said.

Selloff ‘Catalyst’

“This news could have been the catalyst of why these technical traders and other funds might have wanted to get out,” Bart Melek, the head of global commodity strategy at TD Securities in Toronto, said by telephone. “I wouldn’t say that the statements we’re hearing from various interested parties at this point are set in stone. I would see them as positioning for the upcoming negotiations.”

West Texas Intermediate for November delivery fell $1.17 to expire at $50.43 a barrel on the New York Mercantile Exchange. Total volume traded was about 4 percent below the 100-day average. The more-active December contract dropped $1.19 to settle at $50.63 a barrel.

Brent for December settlement declined by $1.29 to end the session at $51.38 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of 75 cents to WTI for December.

Skeptical Markets

“With the big gains that we saw yesterday, it’s not surprising to see a little bit of a selloff today,” Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors LLC, said by telephone. “The markets will be very skeptical going into November 30. Saudi Arabia always wants to keep their market share. They don’t want to lose it to Russia, Nigeria or Iran. We’re going to have a lot of jawboning for the next month.”

Prices rose on Wednesday after Khalid Al-Falih, energy and industry minister of Saudi Arabia, said the oil market is “clearly rebalancing,” though the recovery has been slower than anticipated. Al-Falih said many nations are willing to join OPEC in cutting production.

Nigeria’s move to increase market share also helped trigger a decline on Thursday. The African OPEC member country said it cut the price of every type of crude it sells in an effort to gain a larger piece of the global oil market. Nigeria National Petroleum Corp. lowered by at least $1 a barrel its official selling prices for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists.

For a story on U.S. shale oil surviving the OPEC price war, click here.

The Energy Information Administration said Wednesday that U.S. crude inventories dropped to the lowest level since January in the week ended Oct. 14, shrinking by 5.25 million barrels to 468.7 million barrels. The average of analysts’ estimates in a Bloomberg survey had forecast a 2.1 million barrel gain. Inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, fell below 60 million barrels for the first time since December.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.5 percent at 3:30 p.m. in New York. A stronger U.S. currency reduces the appeal of raw materials as as investment.

Oil-market news:

  • The World Bank raised its forecast for crude, projecting prices will reach $55 a barrel next year from an average of $43 a barrel this year.
  • Iran is negotiating with 16 international energy companies to help operate and manage 50 oil and natural gas projects around the country to boost production, according to the National Iranian Oil Co.
  • In regards to an OPEC production deal: “A constructive deal, one that would have a meaningful impact on oil supplies, remains far from assured,” UBS Group AG analysts, including Giovanni Staunovo, said in an e-mailed report.
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