BLBG: Oil Trades Near 6-Year Low as OPEC Fails to Turn Focus From Glut
Oil traded near the lowest in almost six years in New York as OPEC’s warning that prices may surge without new investment in production failed to shift the market’s focus from more immediate signs of a supply glut.
Futures fell 0.3 percent in New York, paring an earlier increase of as much as 1.3 percent. A spike to $200 a barrel is possible without adequate investment for the long term, OPEC Secretary-General Abdalla El-Badri said. U.S. crude inventories probably rose to 402.1 million barrels last week, the most in records dating back to August 1982, a Bloomberg News survey shows before a government report on Wednesday.
Oil slumped almost 50 percent last year as the U.S. pumped crude at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to reduce output. Prices may drop to as low as $30 a barrel, Gary Cohn, the president of Goldman Sachs Group Inc., said in an interview with CNBC on Monday.
“We are seeing a continuation of the good old-fashioned bull and bear fight that has now prevailed for the past nine days,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said by e-mail. “The market looks like it wants and needs to go lower, but we continue to see buyers coming in who are looking for a bounce.”
West Texas Intermediate for March delivery slipped 12 cents to $45.03 a barrel in electronic trading on the New York Mercantile Exchange at 12:07 p.m. London time. The contract lost 44 cents to $45.15 on Monday, the lowest close since March 2009. The volume of all futures traded was about 17 percent below the 100-day average.
Estimating Surplus
Brent for March settlement rose 14 cents, or 0.3 percent, to $48.30 a barrel on the London-based ICE Futures Europe exchange. It decreased 63 cents to $48.16 on Monday. The European benchmark crude traded at a premium of $3.22 to WTI.
OPEC, which supplies about 40 percent of the world’s oil, is open to a meeting with non-member producers to tackle the global glut, El-Badri said in an interview in London on Monday, estimating the surplus at 1.5 million barrels a day.
He didn’t offer a date for when oil could reach $200 a barrel and said the market would be brought back into balance by a reduction in supply, rather than an increase in demand.
Saudi Arabia won’t balance global crude markets on its own even as prices fall to levels that are “too low for everybody” and threaten investment needed to meet long-term demand, the head of Saudi Arabian Oil Co. said.
‘Singlehanded’ Balance
“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” Chief Executive Officer Khalid Al-Falih said at a conference in Riyadh. “Saudi Arabia will not singlehandedly balance the market in a downturn,” he said, reiterating government policy.
U.S. crude stockpiles probably climbed 4.25 million barrels in the week ended Jan. 23, according to the median estimate in the Bloomberg survey of eight analysts before a report from the Energy Information Administration.
The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota. Production averaged 9.19 million barrels a day through Jan. 9, the most in weekly records compiled since January 1983, data from the Energy Department’s statistical arm show.
To contact the reporter on this story: Rupert Rowling in London at rrowling@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Rachel Graham
