Oil Slumps 6% To Near 7-Year Low On OPEC Inaction, Dollar
NEW YORK, Dec 7 (Reuters) - Crude oil futures tumbled 6 percent on Monday, reaching their lowest in nearly seven years, after OPEC failed to address a growing supply glut, while a stronger dollar made it more expensive to hold crude positions.
Brent and U.S. crude settled at or near February 2009 lows in belated reaction to the Organization of the Petroleum Exporting Countries' (OPEC) policy meeting on Friday which ended without an agreement to lower production.
OPEC oil ministers dropped any reference to the group's output ceiling for the first time in decades, highlighting disagreement among members about how to accommodate Iranian barrels once Western sanctions are lifted.
"What matters from here is whether there'll be any meaningful production cuts in the U.S., which don't seem to be coming," said Doug King, chief investment officer in London for the Singapore-based Merchant Commodity Fund. As of Monday, the $220 million hedge fund was flat on the year after its bearish oil views helped it recoup a 10 percent loss through November.
"Price-wise, the market could be going for max pain after this," King said. "The leader to the downside will be probably be WTI, because that's where the production cuts have to come."
WTI, the West Texas Intermediate benchmark for U.S. crude , settled down $2.32 at $37.65 a barrel. That was its lowest settlement since February 2009, and after reaching a session low of $37.50.
Brent, the global crude benchmark, settled down $2.27 at $40.73, after striking a February 2009 low of $40.60.
WTI forward contracts <0#CL:> through 2024 all dropped below $60 a barrel.
U.S. shale oil output was expected to fall for a ninth consecutive month in January, the U.S. Energy Information Administration said on Monday. But the total decline of about 116,000 barrels per day was less than a tenth of the projected global oversupply in crude.
A Reuters poll of analysts forecast that U.S. commercial crude oil stocks likely remained unchanged last week after 10 straight weeks of builds.
The dollar added to the weight on oil, rising against a basket of currencies after U.S. jobs data on Friday bolstered the case for a rate hike later this month.
The selloff extended to the refined fuels market, with U.S. heating oil tumbling to a May 2009 bottom on forecasts for milder-than-usual weather that could reduce heating demand in the near-term. U.S. gasoline hit a one-month low.
OPEC's output of more than 30 million bpd has compounded an oil glut, pushing production by 0.5 million to 2 million bpd beyond demand.
OPEC kingpin Saudi Arabia, the world's biggest oil exporter, thinks unconventional oil producers, including U.S. shale drillers who have fed the glut, will eventually be squeezed out of the market by high production costs and low selling prices.
Saudi Aramco Chief Executive Amin Nasser told a conference in Doha he hoped to see oil prices adjust at the beginning of next year as unconventional supplies start to decline.
Patrick Pouyanne, CEO of French oil company Total, said a 2016 rebound would be premature as production growth would still outstrip demand.
Despite the overwhelming bearish view, some said oil could turn volatile if U.S. refiners continue ramping up gasoline production due to steady profit margins for the fuel.
"There's seasonal crude de-stocking in December for tax purposes, so anyone heavily shorting WTI should be beware," said Tariq Zahir, fund manager at New York's Tyche Capital Advisors, who is otherwise typically bearish on U.S. crude.
Prices could also violently snap back on short-covering.
"I won't sell it all the way down from here," said Jeffrey Grossman at New York's BRG Brokerage. "It's still risky for a bear."
(Editing by Marguerita Choy and Andrew Hay)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- Blockchain Demands Attention in Oil and Gas
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- CNPC Opens Sea-Land Oil Storage and Transport Facility in Bangladesh
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- US Govt Makes Record Investment of $6B for Industrial Decarbonization
- Perenco Still Searching for Missing Person After Platform Incident
- Eni, Fincantieri, RINA Ink Deal on Maritime Decarbonization
- Oil Falls as US Inventories Increase
- Czech Utility CEZ Bucks Weaker Prices, Demand to Log Record Annual Profit
- Ithaca Energy Studies Deal for Eni's UK Upstream Assets
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- UK Grid Operator Receives Aid to Advance Rural Decarbonization
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call