Questions linger over OPEC+ supply cuts, and group cohesion: Eurasia Group
Oil fell to the lowest since June as momentum traders and lower market volumes worsened a plunge that has been driven by concerns the market is oversupplied.
Crude has plummeted in recent weeks amid signs of swelling global supplies, including estimates from ship-tracking firms that American crude exports are nearing a record 6 million barrels a day. U.S. benchmark West Texas Intermediate slid 4.1 per cent to below US$70 a barrel, while global benchmark Brent retreated 3.8 per cent, slipping below $75. The decline was accelerated by Brent’s dwindling open interest and trend-following algorithms that have been shorting crude.
“The fact that more and more support levels are giving way, this is further fueling the momentum selling,” said Fawad Razaqzada, a market analyst at City Index and Forex.com. “We will need to see a confirmed reversal signal before we even discuss the upside potential.”
Even a U.S. government report on Wednesday that showed the country’s crude stockpiles falling 4.63 million barrels couldn’t arrest oil’s slide. Traders are also partly ignoring the Energy Information Administration data showing a decrease in U.S. crude exports last week because the figure’s so-called adjustment factor — akin to a margin of error — was the biggest move on record.
In a reflection of the market’s weakness, Saudi Arabia has reduced its official selling prices to Asia by the most since February. The Organization of Petroleum Exporting Countries and its allies announced deeper output cuts on Thursday in a bid to stabilize markets, but the drop continued as traders remained skeptical the cartel’s members will follow through on the curbs.
Russian Deputy Prime Minister Alexander Novak said on Tuesday that OPEC+ could take further measures if last week’s agreement isn’t enough to balance the market. On Wednesday, Russian President Vladimir Putin arrived in the UAE at the start of a rare foreign trip in which he was expected to talk about oil with regional leaders.
- WTI for January delivery plummeted 4.1 per cent to settle at $69.38 a barrel in New York.
- Brent for February settlement plunged 3.8 per cent to settle at $74.30 a barrel.