Tags: Brent Oil | Crude | Price | Gas

Brent Oil Falls Below $90 for First Time in More Than Two Years

Thursday, 09 October 2014 01:26 PM

Brent crude dropped below $90 a barrel for the first time since June 2012 as supplies increased and global economic growth slowed. West Texas Intermediate oil fell to a 22-month low in New York.

The European benchmark has decreased more than 20 percent from this year’s June peak, meeting a common definition of a bear market. Shale oil is set to boost U.S. crude production to the most in more than three decades, while last month supplies from OPEC rose and Russian output neared a post-Soviet record. Saudi Arabia, the world’s biggest exporter, cut prices for November exports to Asia to the lowest since 2008. The IMF reduced its global growth forecast for this year and next.

“There’s a plethora of negative news on the demand side,” Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “It’s simple economics. There’s a potential decline in demand while supplies continue to grow.”

Brent for November delivery fell $1.27, or 1.4 percent, to $90.11 a barrel on the London-based ICE Futures Europe exchange at 12:39 p.m. in New York. The contract touched $89.90, the lowest since June 25, 2012. The volume of all futures traded was 46 percent above the 100-day average for the time of day.

WTI for November settlement dropped $1.59, or 1.8 percent, to $85.72 a barrel on the New York Mercantile Exchange. Futures touched $85.60, the lowest intraday price since Dec. 11, 2012. Volume was 22 percent higher than the 100-day average. The U.S. benchmark oil traded at a $4.39 discount to Brent.

The International Monetary Fund said on Oct. 7 that the world’s economy will expand by 3.8 percent next year, down from a forecast of 4 percent in July. The International Energy Agency reduced demand projections for this year and next in a monthly report on Sept. 11.

German Weakness

Germany’s economy is on the edge of recession as exports to China and Russia sag, according to a report by four economic institutes. They cut the 2014 growth outlook for Europe’s biggest economy to 1.3 percent from a forecast of 1.9 percent in April. The economy, which shrank 0.2 percent in the second quarter from the previous three months, posted zero growth in the third and will expand 0.1 percent in the fourth.

“This is a historic moment for the market,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “The German numbers today were really bad and point to lower demand. At the same time supply keeps growing.”

Barclays Plc reduced its fourth-quarter Brent price forecast to an average of $93 from $106, according to an e- mailed report today. The bank said that falling demand, a rising U.S. dollar and the revival of Libyan production crude production were responsible for lower prices. The bank cut its 2015 Brent price forecast to $96 a barrel from $107.

OPEC Supply

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s crude, pumped 30.935 million barrels a day in September, a Bloomberg survey of producers and analysts show. That’s the highest level in 13 months. Libyan output climbed by 280,000 barrels a day to 780,000 last month, the highest level since July 2013.

Iran trimmed prices for November crude shipments to Asia, according to two people with knowledge of the pricing decision. Saudi Arabia reduced prices for November exports to Asia to the lowest since 2008, according to a notice last week. The Saudi cuts were interpreted by banks including Commerzbank AG and Citigroup Inc. as the start of a potential price war between OPEC members seeking to maintain market share as demand growth slows.

Market Share

“The reporting that Iran’s cutting November prices is adding to concern that there will be a struggle with the Saudis over market share,” Yawger said.

WTI dropped 1.7 percent yesterday after a government report showed U.S. crude supplies jumped the most since April. Crude inventories expanded by 5 million barrels last week, the Energy Information Administration reported. U.S. crude production increased to 8.88 million barrels a day in the week ended Oct. 3, the most since March 1986, according to EIA estimates.

Fuel prices also fell after inventories climbed. Gasoline supplies climbed 1.18 million barrels to 209.7 million in the week ended Oct. 3, yesterday’s EIA report showed. Stockpiles of distillate fuel, a category that includes diesel and heating oil, rose by 439,000 barrels to 126.1 million.

‘Ample Supplies’

“Two factors have been driving oil prices lower,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone. “Worries about economic conditions, underlined by the reports about German growth, and ample supplies, demonstrated by the big build in U.S. supply.”

November gasoline futures decreased 3.87 cents, or 1.7 percent, to $2.2797 a gallon on the Nymex. The contract touched $2.2743, the lowest intraday level since Dec. 15, 2010. Pump prices fell 1.3 cents to $3.254 a gallon nationwide yesterday, the least since December, according to AAA, the largest U.S. motoring group.

Ultra low sulfur diesel for November delivery declined 3.81 cents, or 1.5 percent, to $2.5378 a gallon. Futures touched $2.5351, the lowest intraday level since June 26, 2012.

 

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Brent crude dropped below $90 a barrel for the first time since June 2012 as supplies increased and global economic growth slowed. West Texas Intermediate oil fell to a 22-month low in New York.The European benchmark has decreased more than 20 percent from this year's June...
Brent Oil, Crude, Price, Gas
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2014-26-09
Thursday, 09 October 2014 01:26 PM
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