Oil Drops Near $60 a Barrel as OPEC seen Resisting Cuts at $40

OIL in London fell close to $60 a barrel as the United Arab Emirates said OPEC will resist output cuts even if prices slump as low as $40. US benchmark crude extended its decline from the lowest level in more than five years.

Brent futures slid as much as 2.5 percent in London. The market will stabilize itself and the Organization of Petroleum Exporting Countries will wait at least three months before considering an emergency meeting, U.A.E. Energy Minister Suhail Al-Mazrouei said. The International Energy Agency reduced its 2015 demand forecast for the fourth time in five months amid rising supply from non-OPEC countries.

Oil has lost more than 20 percent since OPEC decided at a meeting in Vienna last month to maintain its production target, resisting calls from members including Venezuela to cut output. Drillers in the US, pumping crude at the highest rate in more than three decades, idled the most rigs in almost two years as prices sank further.

“Who’s going to cut first? That’s the global poker game going on at the moment,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. “The market is clearly focused on the negatives for oil.”

Brent for January settlement declined as much as $1.57 to $60.28 a barrel on the London-based ICE Futures Europe exchange and was at $61.16 at 12:30 p.m. Sydney time. The contract, which expires tomorrow, slid $1.83 to $61.85 on Dec. 12, the lowest close since July 2009. The more active February future was 71 cents lower at $61.44. The European benchmark crude traded at a premium of $4.27 to WTI.

OPEC Output

West Texas Intermediate for January delivery dropped as much as $1.56, 2.7 percent, to $56.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract decreased $2.14 to $57.81 on Dec. 12, the lowest since May 2009. Total volume was three times the 100-day average. Prices are down 42 percent this year.

Saudi Arabia led OPEC’s decision on Nov. 27 to maintain its collective quota at 30 million barrels a day. While Venezuela supports an emergency meeting given the price slide, the country hasn’t officially requested one, a foreign ministry official said Dec. 12. The group is due to meet again on June 5.

“We’re not going to change our minds because the prices went to $60 or to $40,” U.A.E.’s Mazrouei told Bloomberg at a conference in Dubai on Dec. 14. “We’re not targeting a price; the market will stabilize itself.”

US Drillers

OPEC, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey of companies, producers and analysts showed.

US rigs targeting oil fell by 29 to 1,546 in the week ended Dec. 12, the lowest since June and the biggest decline since December 2012, according to data from Baker Hughes Inc. A combination of horizontal drilling and hydraulic fracturing has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.

Production in the US expanded to 9.12 million barrels a day through Dec. 5, data from the Energy Information Administration shows. That’s the fastest rate in weekly records that started in January 1983, according to the Energy Department’s statistical arm.

Global consumption will expand by 230,000 barrels a day less than estimated in November, the IEA said in its monthly report on Dec. 13. The Paris-based adviser boosted projections for supplies outside OPEC in 2015 by 200,000 barrels a day, forecasting daily output will expand by 1.3 million barrels after climbing by a record 1.9 million this year.

Demand for OPEC’s crude will drop next year by about 300,000 barrels a day to 28.9 million, the least since 2003, the 12-member group predicted Dec. 10. — Bloomberg

(Source: BusinessWorld Online)

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