MW: Oil extends selloff after UAE minister says OPEC won’t budge
LONDON (MarketWatch) — Crude-oil futures broke below the key $45-a-barrel level and traded close to a six-year low on Tuesday, after the United Arab Emirates’s oil minister said OPEC won’t change its decision not to cut oil output.
On the New York Mercantile Exchange, light, sweet crude for delivery in February CLG5, -2.47% slumped $1.27, or 2.8%, to $44.80 a barrel in the Globex electronic session. Brent crude LCOG5, -2.95% for February delivery on London’s ICE Futures exchange fell $1.25, or 2.6%, to $46.18 a barrel.
Oil prices had lost around 5% on Monday alone, extending the selloff that has gripped oil markets since mid-2014, as sell-side analysts slashed price forecasts and warned of a prolonged glut in global oil markets that will extend well into 2015. Read: Oil’s slump could upend $2 trillion in investments: Goldman
Economists and traders have been closely watching the Organization of the Petroleum Exporting Countries to see whether the cartel would stop the price slide by cutting its output. On Tuesday, Suhail Mohamed Faraj al-Mazrouei, the United Arab Emirates’ oil minister, dashed those hopes, saying OPEC will stick to its decision to keep oil output unchanged regardless of current oil prices.
Instead, he suggested that producers outside OPEC need to adjust their output according to the growth rate of oil supply in the market. The comments came after Saudi Arabian Prince al-Waleed bin Talal over the weekend said the $100-a-barrel threshold will never be topped again.
“Investors are so afraid right now they will just react to any negative news,” economist Vyanne Lai at National Australia Bank said. She said in the current environment where volatility is high, investors aren’t getting any direction to indicate markets could get stronger, and it is a futile exercise to try to pick a price bottom.
“We’re left in a vacuum in terms of what would move fundamentals at this stage. It will remain a more sentiment-driven market, and so far sentiment is on the downside,” Lai said.
China imports surge: Strong trade data from China, the world’s second-largest oil consumer, failed to boost sentiment. China’s December exports rose by a faster-than-expected 9.7% on the back of stronger overseas demand, a small bright spot in the country’s slowing economy.
Its oil imports for the month hit record highs. China imported 30.37 million metric tons of crude oil in December, equivalent to 7.2 million barrels a day, preliminary data from the General Administration of Customs showed Tuesday. This was 13% higher than a year earlier, and topped a record high in January 2014 of 28.16 million tons of imported oil.
“This was largely expected given the surge in Chinese buying as prices have fallen, with imports expected to remain very strong in January and February,” analyst Ivan Szpakowski at Citi Research said.
But while China posted a 9.7% growth in oil imports in 2014, Szpakowski expects net imports to grow at a slower 3% for 2015 due to fewer new refineries being built this year.
Later Tuesday, the U.S. Energy Department will publish its monthly oil market report and any major revisions to global oil demand or supply projections could move oil prices.
Nymex reformulated gasoline blendstock for February RBG5, -2.28% — the benchmark gasoline contract — fell 2 cents to $1.252 a gallon.
