Oil drops on signs of rising U.S. supply, reduced demand outlook
OIL DROPPED IN NEW YORK for the second consecutive day after the International Energy Agency cut its forecast for global demand.
BLOOMBERG FILE PHOTO
By Ben Sharples and Sherry Su Bloomberg News
LONDON - Oil declined for a second day in New York amid speculation that U.S. crude inventories rose last week and after the International Energy Agency cut its forecast for global demand growth this quarter.
Futures slipped as much as 1.2 percent. U.S. crude stockpiles probably increased last week to the highest level in more than three months, according to a Bloomberg survey before an Energy Department report on Nov. 15. OPEC will need to pump less crude this quarter as demand growth slows, the IEA said. Oil slid yesterday as investors awaited budget talks in the U.S., and extended losses after European leaders said they’ll meet again Nov. 20 to discuss additional funding for Greece.
“Primarily bearish winds are blowing in oil markets at the moment,” said Filip Petersson, a commodities strategist at SEB AB in Stockholm who predicts Brent crude will average $110 a barrel this quarter. “On the macro side, bearish influences are coming from a new wave of Greek worries and the approaching U.S. fiscal cliff.”
Crude for December delivery slid as much as 99 cents to $84.58 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.49 at 12:10 p.m. London time. The contract fell 50 cents to $85.57 yesterday. Prices are down 13 percent this year.
Brent for December settlement declined 31 cents, or 0.3 percent, to $108.76 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.27 to West Texas Intermediate futures, compared with $23.50 yesterday.
U.S. crude inventories probably rose 2.5 million barrels to 377.3 million, according to the median estimate of seven analysts in the Bloomberg survey before the Energy Department report. Gasoline supplies climbed 800,000 barrels while distillate stockpiles declined 500,000 barrels, according to the survey. The inventory data will be released Nov. 15, a day later than usual because of the Veterans Day holiday yesterday.
Global oil consumption will average 90.1 million barrels a day this quarter, which is 290,000 barrels a day, or 0.3 percent less than previously forecast, the Paris-based IEA said in its monthly report today.
“The market is very well supplied,” Abdalla El-Badri, OPEC’s secretary-general, said today at the Oil & Money conference in London. “There is no doubt about it. Stocks are very high.”
The Organization of Petroleum Exporting Countries will need to supply 30 million barrels a day this quarter, 500,000 barrels a day less than previously projected because of the weaker demand outlook and expectations for increased non-OPEC supply, the IEA said. Global demand will rise by 830,000 barrels a day in 2013 to 90.4 million, 70,000 barrels less than last month’s forecast.
President Barack Obama invited the Democratic and Republican leaders in Congress to the White House this week to begin talks on a plan to avert the so-called fiscal cliff. If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January.
“The biggest challenge we are facing is the U.S. fiscal cliff,” El-Badri said.
European finance ministers meeting in Brussels yesterday put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. They granted the country a two-year extension to 2016 to cut its budget deficit to 2 percent of gross domestic product.
The Buzzard oil field in the North Sea resumed production late yesterday after halting during the Nov. 10 to Nov. 11 weekend, according to three people with knowledge of the matter, who declined to be identified as the information is confidential.
The 200,000 barrel-a-day Buzzard field is the biggest contributor to Forties crude. Buzzard restarted production on Nov. 3 after two months of maintenance, Nexen Inc., the operator of the field, said on Nov. 5. Two officials at Nexen, based in Calgary, Canada, didn’t immediately respond to e-mails from Bloomberg today seeking comment.