Key market uncertainties include the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices. Crude futures have fallen in six of the last seven sessions, losing more than $5 a barrel. OPEC is widely expected not to cut production at its December 4 meeting, contrary to the preferences of a few members.
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Oil is more than 60 percent down since mid 2014, with the market plagued by oversupply owing in particular to booming United States shale output.
Crude has dropped 45 per cent in the past year as the Organization of Petroleum Exporting Countries pumped above its collective quota and Russian output rose to a post-Soviet high, swelling global stockpiles.
Brent was off 36 cents, or almost 1 percent, at $43.68 a barrel, its downside limited by the impending expiry of its front month December contract at Friday’s settlement.
OPEC and the global Energy Agency both sounded alarms this week about massive stockpiles of crude oil sitting in storage around the world, which could keep prices low even if non-OPEC production declines next year as expected.
“You can talk all you want about oil demand being better next year and beyond, but right now we have a heck of a glut on our hands that I think has to be priced in a few more”, said John Kilduff, partner at NY energy hedge fund Again Capital.
ANZ also said that big price rises this year were unlikely: “A year end recovery in commodity prices remains unlikely with a stronger US$ and EM (emerging market) growth concerns”. Prices fell 8% this week, the largest one-week percentage decline since March.
Developed countries have continued stockpiling oil and commercial inventories in OECD nations now stand at a record 3 billion barrels, the IEA said.
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At the same time, oil producers have hiked their short positions in Brent futures to record highs of nearly 1.3 million in a sign that they are increasingly hedging their production in expectation of falling prices.
