Brent drops a second day as OPEC weighs sparing three from cuts
2014-11-25 11:45:09
Brent crude fell for a second day as OPEC considered exempting three members from potential production cuts when it meets this week. West Texas Intermediate was steady in New York.
Futures dropped as much as 0.7 percent in London. Iraq, Iran and Libya won’t have to trim supplies should the Organization of Petroleum Exporting Countries agree to reduce output, according to two people with knowledge of the proposal. If the market is oversupplied, it isn’t the first time, Saudi Arabia’s Oil Minister Ali Al-Naimi said in Vienna yesterday as the 12-nation group prepared for discussions on Nov. 27.
Oil has collapsed into a bear market amid the fastest rate of U.S. production in more than three decades, even as slowing global economic growth signaled weaker demand. OPEC, which pumps about 40 percent of the world’s oil, has maintained its official quota at 30 million barrels a day since January 2012.
“There is only one game for OPEC and that is stronger global demand growth and softer U.S. shale oil supply growth,” Bjarne Schieldrop, chief commodities analyst at Oslo-based SEB Merchant Banking, said by e-mail. “A higher oil price is not the answer to that problem.”
Brent for January settlement declined as much as 57 cents to $79.11 a barrel on the London-based ICE Futures Europe exchange and was at $79.57 at 9:06 a.m. London time. The contract slid 68 cents to $79.68 yesterday. The European benchmark crude traded at a premium of $3.72 to WTI.
‘Unacceptable’ Prices
WTI for January delivery was 5 cents higher at $75.83 a barrel in electronic trading on the New York Mercantile Exchange. It lost 73 cents to $75.78 yesterday. The volume of all futures traded was about 30 percent below the 100-day average for the time of day. Prices have decreased 23 percent this year.
OPEC pumped 30.97 million barrels a day in October, exceeding its collective output target for a fifth straight month, according to data compiled by Bloomberg. Action must be taken to boost prices because current levels are unacceptable, Iraqi Oil Minister Adel Abdul Mahdi said yesterday.
“We’ve seen oversupply before but the U.S. is the difference,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “We’ll need to see a cut under 30 million barrels to boost prices.”
The proposal to spare Iran, Iraq and Libya from supply cuts is one of several being discussed because those countries are pumping below potential, said the two people, who asked not to be identified in line with their national policies. The three countries produced almost 7 million barrels a day last month, compared with a 1970s peak of more than 10 million, data compiled by Bloomberg show.