SD: Brent Crude Falls Below $45 for First Time Since 2009 on Surplus
(Bloomberg) -- Oil in London slid below $45 a barrel for the first time since March 2009 on concerns Chinese demand is slowing just as supplies from the U.S. and Iran threaten to swell a global surplus.
Brent futures fell as much as 3.9 percent, extending a 7.3 percent drop last week that was the biggest in five months. Commodities sank to the lowest in 16 years on forecasts for the weakest Chinese growth since 1990. Iran’s Oil Minister Bijan Namdar Zanganeh vowed to expand output “at any cost,” according to the ministry’s news website. The number of active oil rigs in the U.S. rose for the seventh time in eight weeks, Baker Hughes Inc. data showed Friday.
Oil’s worsening global surplus has driven prices down by more than 30 percent since May, prompting hedge funds to cut bullish bets to a five-year low. Iran aims to join leading members of the Organization of Petroleum Exporting Countries in raising production while U.S. crude stockpiles are almost 100 million barrels above the five-year seasonal average.
“The Chinese growth slowdown continues to weigh,” Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark said in a report. “Markets are still worried about the reduced growth pace in this huge country. The supply-demand situation still points to a surplus of oil in the market.”
Brent for October settlement declined as much as $1.79 to $43.67 a barrel on the London-based ICE Futures Europe exchange and was at $43.91 at 10:04 a.m. London time. The contract lost $1.16 to $45.46 on Friday. The European benchmark crude traded at a $5.79 premium to West Texas Intermediate, the U.S. marker grade.
Iran Production
WTI for October delivery decreased as much as $1.51, or 3.7 percent, to $38.94 a barrel on the New York Mercantile Exchange, the lowest price since February 2009. Prices fell 4.8 percent through Friday for an eighth weekly drop, the longest retreat since 1986. Total volume was almost double the 100-day average.
The Bloomberg Commodity Index of 22 raw materials fell 1.9 percent to the lowest level since August 1999 as China’s economic slowdown exacerbated surpluses from oil to metals. The Asian nation is the world’s biggest energy consumer. Crude’s slump triggered losses in related equities. China Petroleum & Chemical Corp. slid as much as 7.6 percent to the lowest intraday level since September 2010 in Hong Kong.
Iran Return
Iran was OPEC’s second-largest producer before international penalties over its nuclear program began in mid-2012. The country will seek to regain oil sales regardless of prices, Zanganeh said last month after negotiators reached a deal with world powers offering sanctions relief.
OPEC, which supplies about 40 percent of the world’s crude, has pumped above its quota of 30 million barrels a day for more than a year, according to data compiled by Bloomberg. Iran’s output trailed that of Saudi Arabia and Iraq in July.
In the U.S., the rig count climbed by 2 to 674 through Aug. 21, according to Baker Hughes, an oilfield-services company. That’s the highest level since May 1.
“We’ve still got a glut,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. “Oil will continue to trade lower.”
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net John Deane
