U.S. crude futures slid for a fifth time in six days after OPEC cut forecasts for the amount of oil it needs to supply and the dollar strengthened.
West Texas Intermediate fell as much as 2 percent. OPEC lowered every published forecast for its crude demand through 2035 except next year. Oil also dropped as Libya said it will resume pumping crude “soon” at its biggest field. The euro weakened against the dollar as European Central Bank President Mario Draghi deepened his commitment to stimulus.
“Demand is down and supply is up, we are in a situation where we will continue to go lower,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The stronger dollar is weighing on the market. We are selling any rallies that we get, which has been a good trade.”
WTI for December delivery slid 63 cents, or 0.8 percent, to $78.05 a barrel at 12:59 p.m. on the New York Mercantile Exchange. The contract climbed $1.49 to $78.68 a barrel yesterday. The volume of all futures traded was about 5 percent below the 100-day average for the time of day.
Brent for December settlement rose 6 cents to $83.01 a barrel on the London-based ICE Futures Europe exchange after earlier falling as much as 1.1 percent. Volume was 10 percent below the 100-day average. The European benchmark crude traded at a $4.84 premium to WTI. The spread closed at $4.27 yesterday, the narrowest since Oct. 22.
“We couldn’t maintain the strength,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The market is probably going to remain weak for a while. A stronger dollar usually correlates to lower commodity prices, and it’s certainly true in the case of petroleum.”
Gasoline futures climbed 2.1 percent to $2.1311 a gallon in New York. Prices tumbled to the lowest since 2010 earlier this week.
Demand for crude from the Organization of Petroleum Exporting Countries may fall to a 14-year low of 28.2 million barrels a day in 2017, according to the group’s annual World Oil Outlook. That’s a cut of 600,000 a day from last year’s report and 800,000 below the amount required this year.
The group’s members face mounting competition in the U.S., where technological breakthroughs, hydraulic fracturing and horizontal drilling, have caused a surge in domestic production. Oil prices slumped into a bear market last month amid speculation OPEC won’t do enough to tackle a glut when it meets on Nov. 27 to discuss output.
“OPEC reducing production is important now to stabilize the price,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “We are producing more and consuming less.”
Libya’s Sharara field was shut as a precaution after gunmen stormed the on-site production compound, Mansur Abdallah, director of oil movement at the Zawiya refinery and oil port, said in a telephone interview. While it has a similar capacity to the Waha field in central Libya, Sharara is the nation’s largest producer, with an output of 290,000 barrels a day before the latest shutdown, Abdallah said.
Crude stockpiles in the U.S., the world’s biggest oil consumer, increased by 460,000 barrels to 380.2 million in the week ended Oct. 31, according to Energy Information Administration estimates.
Draghi told reporters at a press conference in Frankfurt that policy makers are unanimous in their commitment to expand stimulus if needed as he signaled officials may cut growth forecasts next month.
© Copyright 2023 Bloomberg News. All rights reserved.