Traders betting on a jump in US crude prices above those in the rest of the world if Congress lifts America’s oil-export ban may be disappointed.
Advertisement
Futures dropped as much as 1 per cent in NY after losing nearly 11 per cent last week, the most in a year.
Investors were likely reacting to the release of the International Energy Agency’s (IEA) final Oil Market Report of the year, which indicated that global demand growth of 1.2 million barrels a day (mb/d) is forecasted in Q1 2016, down from a peak of 2.2 mb/d recorded in Q3 2015. Falling below that level would take Brent to the prices not seen since the middle of 2004.
With Opec flooding global markets while U.S. drillers keep producing large amounts of crude, the Brent-West Texas Intermediate (WTI) premium has halved over the past week to about $1.50 a barrel.
“The oil market remains more tightly balanced than is reflected in today’s low prices”. Brent crude futures for January, the global benchmark, fell just one cent to US$37.92 a barrel in London.
Some dealers suggested the spread was responding to signs from Washington that legislators may finally throw out a 40-year old ban on exporting US crude as part of broader tax and spending legislation.
“Collapsing oil prices and the potential rise in interest rates in the United States… compounded investors’ nerves”, said David Papier, analyst at traders ETX Capital.
“While it is often said that a boom nourishes a boom, it might be more apt to turn this around and say that gloom is nourishing gloom on the oil market just now”, analysts at Commerzbank said in a note.
Iran’s crude oil exports are set to hit a six-month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year.
While most producers are running flat out, only Saudi Arabia has significant spare production and even it could only plug a gap of 2 percent of global demand at predicted 2016 rates.
Brent declined by 5 cents to $37.88 a barrel, following a decline of 4.5 percent on Friday and 12 percent on the week.
The country plans to boost oil production to 5.7 million barrels a day and gas output to 1.4 billion cubic meters a day by 2021. Iranian Oil Minister Bijan Namdar Zanganeh asked the OPEC to reduce production by at least 1.3 million barrels per day (mbpd) on December 1.
Advertisement
“In view of the aforementioned, and emphasising its commitment to ensuring a long-term stable and balanced oil market for both producers and consumers, the conference agreed that member countries should continue to closely monitor developments in the coming months”.
