26/10/2014 07:42 AST
West Texas Intermediate retreated from the biggest gain since September amid speculation a drop in Saudi Arabian oil supply to the market isn’t a signal for production cuts. Brent widened its premium to WTI.
Futures capped a fourth weekly decline. Saudi Arabia’s crude supplies slipped last month even as production increased, a person familiar with the kingdom’s oil policy said yesterday. Both Brent and WTI have dropped more than 20 percent from this year’s high in June on concern global supply is outpacing demand.
“The Saudis are not cutting production,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “They can tolerate low prices. We have plenty of supply and the trend for oil is to go lower.”
WTI for December delivery dropped $1.08, or 1.3 percent, to end at $81.01 a barrel on the New York Mercantile Exchange. The volume of all futures traded was about 16 percent below the 100-day average. The contract climbed $1.57, or 2 percent, to $82.09 yesterday. Prices were down 2.1 percent this week.
Brent for December settlement decreased 70 cents, or 0.8 percent, to $86.13 a barrel on the London-based ICE Futures Europe exchange. Volume was 25 percent below the 100-day average. Futures were little changed this week. The European benchmark crude closed at a premium of $5.12 to WTI on ICE, the most in a month.
Saudi Supplies
Saudi Arabia’s oil supply to the markets fell 328,000 barrels a day to 9.36 million in September from 9.69 million barrels in August, according to the person familiar with its policy, who asked not to be identified because he isn’t authorized to speak on the matter.
The figure doesn’t include the amount of oil put into storage. Production was 9.7 million barrels a day last month, up from almost 9.6 million in August, the person said. That’s the same as OPEC reported in its most recent assessment on Oct. 10.
The decline is a result of the country keeping more of its own output to meet rising domestic demand, according to BNP Paribas SA. Saudi refinery demand for crude rose to the most in at least 12 years in August.
“The Saudis increased production, so there is no signal that they’ve changed their behavior with an eye on pushing prices back up,” Bjarne Schieldrop, chief commodity analyst in Oslo at SEB AB, said by phone.
Ebola Case
Oil prices may also come under pressure if Ebola spreads to other cities, Zahir said. The first case of Ebola was confirmed in New York City yesterday as a doctor tested positive after returning from aid work in West Africa.
“It may really take a big hit in consumer sentiment,” Zahir said. “People will be fearful if this thing spreads further.”
The doctor, Craig Spencer, 33, is being treated in an isolation unit at Bellevue Hospital Center in Manhattan. At the same time, officials are monitoring those who were with him as he traveled on the subway, went bowling and had close contact with several people.
“If you see less travel, if you see people are concerned about going out shopping, it could affect oil demand,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “It’s the perception that drives fear, not so much reality.”
WTI could fall as low as $75 a barrel over the next three months, Bank of America Corp. analysts including Francisco Blanch in New York said in a report dated Oct. 23. Crude inventories along the U.S. Gulf Coast may lead to an increase in supplies at Cushing, Oklahoma, where oil is delivered to settle Nymex futures contracts, the bank said.
Cushing supplies gained 953,000 barrels last week to 20.6 million, according to the Energy Information Administration. Total stockpiles climbed 7.11 million barrels to 377.7 million, near the highest ever level for this time of year.
Bloomberg
Please wait...
