Brent crude fell to the lowest level in more than two years, narrowing its premium over West Texas Intermediate, after the International Energy Agency cut demand forecasts.
The Brent-WTI spread shrank to the smallest since July as the U.S. benchmark rebounded after failing to break below $90. The IEA reduced estimates for this year and next following a “remarkable” slowdown in the second quarter that prompted Saudi Arabia to pare exports to a three-year low.
“Demand is the big story here,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Supply is so big but demand is not catching up. The IEA report is hitting Brent and the spread is going to continue to contract.”
Brent for October settlement dropped 62 cents, or 0.6 percent, to $97.42 a barrel at 11:30 a.m. New York time on the London-based ICE Futures Europe exchange after sliding to $96.72, the lowest since July 2, 2012.
The volume of all futures traded was about 44 percent above the 100-day average. WTI for October delivery rose 43 cents to $92.10 a barrel on the New York Mercantile Exchange.
The contract earlier fell as much as 1.4 percent to $90.43, the lowest since May 1, 2013. Volume was about 93 percent above the 100-day average. Brent traded at a premium of $5.29 to WTI on ICE, compared with $6.37 yesterday.
‘Large Correction’
“It’s a very large correction, which invites a lot of technical buying,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. “The market is putting its weight behind WTI. People are now seeing that this is a relatively inexpensive level to enter a long position for oil.”
The Paris-based IEA cut its projection for demand growth in 2014 by 150,000 barrels a day because of weaker performance in China and Europe, forecasting that worldwide consumption will expand by 900,000 barrels a day to average 92.6 million.
Global demand will increase by 1.2 million barrels a day, or 1.3 percent, to 93.8 million next year. The expansion is 165,000 barrels a day less than it predicted a month ago.
The agency lowered estimates for the amount of crude that the Organization of Petroleum Exporting Countries will need to produce by 200,000 barrels a day for this year and 300,000 a day in 2015.
Saudi Arabia, OPEC’s biggest member, cut production by 330,000 barrels a day to 9.68 million in August, according to the IEA. The nation exported 6.95 million barrels a day in June.
OPEC Output
Output from OPEC’s 12 members slipped by 130,000 barrels a day in August to 30.3 million as lower production from Saudi Arabia and Iraq countered a recovery in Libya, according to the report. “Oil prices continue their nosedive,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report.
“OPEC already appears to be responding to the threat of oversupply. All the same, further cuts would need to be made by OPEC in order to balance the oil market.” Saudi Arabia’s oil minister, Ali al-Naimi, said he’s not worried about the price decline.
Oil prices “always fluctuate, and this is normal,” al-Naimi told reporters in Kuwait today. It’s too early to talk about the need for oil exporters to meet over prices, he said. The IEA said it curbed its 2015 estimates in anticipation of weaker economic growth forecasts from the International Monetary Fund in October.
Next year’s demand projections for China, the world’s second-largest oil consumer after the U.S., were cut by about 100,000 barrels a day to 10.6 million.
Jobless Claims
In the U.S., the world’s biggest oil-consuming country, jobless claims climbed by 11,000 to 315,000 in the week ended Sept. 6, a Labor Department report showed today.
It was the highest reading since June 28 and exceeded the Bloomberg survey median forecast of 300,000. “The economy is going to struggle and that’s bad news for oil demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
“There is economic uncertainty around the world.”
U.S. crude output will rise 14 percent to 8.53 million barrels a day this year and reach 9.53 million in 2015, the most since 1970, the Energy Information Administration forecast on Sept. 9.
bloomberg.com
The Brent-WTI spread shrank to the smallest since July as the U.S. benchmark rebounded after failing to break below $90. The IEA reduced estimates for this year and next following a “remarkable” slowdown in the second quarter that prompted Saudi Arabia to pare exports to a three-year low.
“Demand is the big story here,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Supply is so big but demand is not catching up. The IEA report is hitting Brent and the spread is going to continue to contract.”
Brent for October settlement dropped 62 cents, or 0.6 percent, to $97.42 a barrel at 11:30 a.m. New York time on the London-based ICE Futures Europe exchange after sliding to $96.72, the lowest since July 2, 2012.
The volume of all futures traded was about 44 percent above the 100-day average. WTI for October delivery rose 43 cents to $92.10 a barrel on the New York Mercantile Exchange.
The contract earlier fell as much as 1.4 percent to $90.43, the lowest since May 1, 2013. Volume was about 93 percent above the 100-day average. Brent traded at a premium of $5.29 to WTI on ICE, compared with $6.37 yesterday.
‘Large Correction’
“It’s a very large correction, which invites a lot of technical buying,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. “The market is putting its weight behind WTI. People are now seeing that this is a relatively inexpensive level to enter a long position for oil.”
The Paris-based IEA cut its projection for demand growth in 2014 by 150,000 barrels a day because of weaker performance in China and Europe, forecasting that worldwide consumption will expand by 900,000 barrels a day to average 92.6 million.
Global demand will increase by 1.2 million barrels a day, or 1.3 percent, to 93.8 million next year. The expansion is 165,000 barrels a day less than it predicted a month ago.
The agency lowered estimates for the amount of crude that the Organization of Petroleum Exporting Countries will need to produce by 200,000 barrels a day for this year and 300,000 a day in 2015.
Saudi Arabia, OPEC’s biggest member, cut production by 330,000 barrels a day to 9.68 million in August, according to the IEA. The nation exported 6.95 million barrels a day in June.
OPEC Output
Output from OPEC’s 12 members slipped by 130,000 barrels a day in August to 30.3 million as lower production from Saudi Arabia and Iraq countered a recovery in Libya, according to the report. “Oil prices continue their nosedive,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report.
“OPEC already appears to be responding to the threat of oversupply. All the same, further cuts would need to be made by OPEC in order to balance the oil market.” Saudi Arabia’s oil minister, Ali al-Naimi, said he’s not worried about the price decline.
Oil prices “always fluctuate, and this is normal,” al-Naimi told reporters in Kuwait today. It’s too early to talk about the need for oil exporters to meet over prices, he said. The IEA said it curbed its 2015 estimates in anticipation of weaker economic growth forecasts from the International Monetary Fund in October.
Next year’s demand projections for China, the world’s second-largest oil consumer after the U.S., were cut by about 100,000 barrels a day to 10.6 million.
Jobless Claims
In the U.S., the world’s biggest oil-consuming country, jobless claims climbed by 11,000 to 315,000 in the week ended Sept. 6, a Labor Department report showed today.
It was the highest reading since June 28 and exceeded the Bloomberg survey median forecast of 300,000. “The economy is going to struggle and that’s bad news for oil demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
“There is economic uncertainty around the world.”
U.S. crude output will rise 14 percent to 8.53 million barrels a day this year and reach 9.53 million in 2015, the most since 1970, the Energy Information Administration forecast on Sept. 9.
bloomberg.com
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