Brent crude slumped to the lowest price since mid-2004 amid speculation suppliers from the Middle East to the U.S. will exacerbate a record glut as they fight for market share.
Futures fell as much as 2.2 percent in London after a 2.8 percent drop last week. Producers are focusing on reducing costs amid the price decline, Qatar Energy Minister Mohammed Al Sada said Sunday at a gathering of Arab oil-exporting nations in Cairo. Drillers in the U.S. put the most rigs back to work since July, adding 17, data from Baker Hughes Inc. showed.
Oil has collapsed below levels last seen during the 2008 global financial crisis on signs the market’s oversupply will worsen. The Organization of Petroleum Exporting Countries effectively abandoned output limits at a Dec. 4 meeting, while the U.S. on Friday passed legislation that lifted a 40-year ban on crude exports.
“There hasn’t been any significant signs of a pick-up in demand and we haven’t seen any meaningful cuts to production,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Nothing has really changed in the oil market over the past couple of months apart from the price.”
Brent for February settlement slid as much as 82 cents to $36.06 a barrel on the ICE Futures Europe exchange, the lowest level in intraday trade since July 2, 2004. The contract was at $36.17 at 7:42 a.m. London time. Prices are down 37 percent this year, set for a third annual loss.
West Texas Intermediate for January delivery, which expires Monday, was 36 cents lower at $34.37 a barrel on the New York Mercantile Exchange. It dropped 22 cents to $34.73 on Friday, the lowest close since February 2009. The more active February contract was down 44 cents at $35.62. Total volume was about six times the 100-day average.
There’s no need to be pessimistic about oil prices, Qatar’s Al Sada said at the meeting of the Organization of Arab Petroleum Exporting Countries, which includes seven OPEC members. Crude is set to climb from current “very low” levels that are hurting producers, Iraqi Oil Minister Adel Abdul Mahdi said, without predicting when prices may rebound.
The number of rigs targeting oil increased to 541, Baker Hughes, an oilfield-services provider, reported on its website Friday. The Permian Basin in West Texas led the gains with five machines put back to work. U.S. crude stockpiles have expanded to 490.7 million barrels, more than 130 million above the five-year average, Energy Information Administration data showed last week.
The spread between Brent and New York futures has shrunk to the narrowest in 11 months amid speculation that the U.S. plan to allow domestic oil to be shipped overseas may ease the nation’s oversupply. The European benchmark crude was at a premium of 66 cents a barrel to the February WTI contract.
U.S. producers including Continental Resources Inc. and ConocoPhillips had been pressing for an end to restrictions on exports of most raw, unprocessed crude. While repealing the ban could allow unfettered access to supplies, driving the most important change in the country’s oil policy in more than a generation, buyers in the east may have a limited appetite for the quality of cargoes on offer.
Many Asian refiners are geared to process heavier, cheaper crude with higher sulfur content. The lighter and cleaner shale oil from the U.S. has also got about a third farther to come than alternative supplies from the Middle East, representing additional shipping costs.