Oil set for longest weekly slump since January
MELBOURNE, Aug 14 — Oil headed for the longest run of weekly declines since January amid signs the global glut that’s driven prices to the lowest in six years will be prolonged.
Futures dropped 0.6 per cent in New York today, bringing the decline since August 7 to 4.3 per cent for a seventh weekly loss. The market surplus will last through 2016, the International Energy Agency said Wednesday, while OPEC reported that output climbed last month to the highest level in more than three years. A measure of price fluctuations is poised for a second weekly advance amid mixed demand signals from China.
Oil has slumped more than 30 per cent from its June closing peak as leading members of the Organisation of Petroleum Exporting Countries maintain output. China’s record imports in July boosted speculation that sustained buying may alleviate a glut, while further devaluation of its currency raised concern that its economy is slowing.
“Fundamentals are weak, and they will continue to be so at least until 2016,” Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, said by phone. “There will be some tightening towards the end of the year but the oversupply situation will continue. Maybe prices have to stay at this level for longer in order to have a large supply reaction.”
West Texas Intermediate for September delivery was at US$41.94 (RM171) a barrel on the New York Mercantile Exchange, down 29 cents, at 8.57am London time. The contract declined US$1.07 to US$42.23 yesterday, the lowest level since March 2009. The volume of all futures traded was 40 per cent above the 100-day average. Prices have decreased 21 per cent this year.
Global supplies
Brent for September settlement, which expires today, was 10 cents lower at US$49.12 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of US$7.19 to WTI. The more-active October contract was 7 cents lower at US$49.56 a barrel.
OPEC raised output by 100,700 barrels a day to 31.5 million in July amid a recovery in Iranian supply, the group said in its monthly market report this week, citing external sources. Saudi Arabia, the group’s biggest member, told OPEC it cut production by the most in almost a year.
Crude stockpiles in the US, the world’s biggest oil consumer, remain about 90 million barrels above their five-year seasonal average even as production eased and supplies fell last week, according to data from the Energy Information Administration.
The Chicago Board Options Exchange Crude Oil Volatility Index closed at 43.23 yesterday, the highest level since April. The gauge of hedging costs on the US Oil Fund, the largest exchange-traded fund tracking WTI futures, is up 5 per cent this week.
Analysts in a Bloomberg survey were divided on whether WTI will extend losses. Fourteen of 41, or 34 per cent, said they were currently bullish, while 13 said they were bearish and the remaining 14 described their view as neutral. — Bloomberg
