Oil Dawdles Near $50 as Market Yawns at Efforts to Whittle Glut
(Bloomberg) -- Oil crept toward the $50-a-barrel mark after OPEC's chief dangled the possibility of prolonging supply curbs well into next year.
Oil producers led by Saudi Arabia and Russia are succeeding in shrinking a worldwide glut of crude, yet may need to take further steps to sustain the effort, OPEC Secretary-General Mohammad Barkindo said. The Saudi's state-owned oil company announced the "deepest customer allocation cuts in its history," a reference to how much oil it intends to ship next month. Futures fluctuated in a 66-cent range amid light volume on the U.S. Columbus Day holiday.
"It's kind of a day of indecision," Michael Hiley, head of over-the-counter energy trading at New York-based LPS Partners, said by telephone. Until producers formally agree to extend the cuts, the market is likely going to ignore OPEC headlines, he said.
Oil on Friday capped the steepest weekly decline since May as Hurricane Nate turned out to pose little threat to Gulf Coast crude and refining assets. The Saudi kingdom and Russia were leading consultations between the Organization of Petroleum Exporting Countries and other major suppliers about the future of their supply caps, Barkindo said Sunday in New Delhi. Bullish developments during the last few months have been largely offset by surging supply additions from U.S. shale drillers.
U.S. explorers raised crude production to 9.56 million barrels a day in the week ended Sept. 29, the fourth straight increase since Hurricane Harvey slammed south Texas and forced some wells to shut down. Output has risen 9 percent this year, on track for the largest annual increase since 2014, when crude averaged more than $92.
"With rising production levels and no definitive word from OPEC and the Russians that they are going to extend the cut or deepen it, the rally seems to have lost its momentum," Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. Brent at $55 and WTI at $50 is an inflection point and the market is "waiting to see what the next shoe to drop is now."
West Texas Intermediate for November delivery added 29 cents to settle at $49.58 a barrel on the New York Mercantile Exchange. Total volume traded was about 36 percent below the 100-day average. Prices slid $1.50 to $49.29 on Friday, capping a 4.6 percent drop for the week.
Brent for December settlement rose 17 cents to end the session at $55.79 on the London-based ICE Futures Europe exchange, and traded at a $5.86 premium to WTI for the same month.
Waterways, pipeline terminals and offshore platforms shut during Nate's passage over the Gulf Coast during the weekend began reopening. About 85 percent of oil production in the Gulf remained shut as of Monday, according to the Bureau of Safety and Environmental Enforcement.
--With assistance from Ben Sharples and Angelina Rascouet
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