Oil fell below $35 a barrel in New York for the first time since 2009 as Iran reiterated its pledge to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply.
Futures fell as much as 2.7 percent to $34.67 a barrel in New York, the lowest since Feb. 19, 2009. They lost almost 11 percent last week, the biggest drop in a year. There’s “absolutely no chance” Iran will delay its plan to increase shipments even as prices decline, said Amir Hossein Zamaninia, the nation’s deputy oil minister for international and commerce affairs. Speculators in the U.S. have raised bearish bets to an all-time high.
Oil slumped last week to levels last seen during the global financial crisis, while speculators increased bets on falling U.S. crude prices to an all-time high after the Organization of Petroleum Exporting Countries effectively abandoned production limits. The supply glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.
“Gloom nourishes gloom,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The market is fully acknowledging that OPEC is no longer in price-control mode or providing a floor, and that the group is unlikely to change that strategy any time soon.”
WTI for January delivery fell as much as 95 cents to $34.67 a barrel on the New York Mercantile Exchange and was at $34.80 at 11:46 a.m. London time. The volume of all futures traded was 35 percent above the 100-day average. The aggregate volume of monthly WTI contracts climbed to a record of 1.596 million on the Nymex on Dec. 8. Each contract corresponds to 1,000 barrels of oil.
Brent for January settlement dropped as much as $1.31, or 3.5 percent, at $36.62 a barrel on the London-based ICE Futures Europe exchange, the lowest since Dec. 26, 2008. The European benchmark crude was at a premium of $1.93 to WTI.
In the U.S., senate negotiators are nearing a deal to allow unfettered crude oil exports for the first time in 40 years, though differences remain on renewable-energy tax credits that Democrats are demanding in return, according to people close to the discussions.
While any agreement could still collapse in the coming days — the deal faces opposition in the House — lawmakers are weighing the extension of solar and wind tax credits for as long as five years in exchange for lifting the crude-export restrictions, which were established to counter the energy shortages of the 1970s.
Iran, which expects international sanctions over its nuclear program to be lifted by the first week of January, has already secured customers for its planned supply expansion, Zamaninia said in an interview in Tehran. The government is also preparing to offer oil and natural gas contracts to investors. The country pumped 2.8 million barrels a day last month, data compiled by Bloomberg show.
OPEC, which set aside its output quota at a Dec. 4 meeting, is displaying hardened resolve to maintain sales, the IEA said in its monthly report Friday. While the group’s strategy has affected other producers, triggering the steepest fall in non-OPEC supply since 1992, world oil inventories will probably swell further once Iran restores exports, predicted the Paris-based energy adviser to developed economies.
World powers said they persuaded some of Libya’s feuding factions to form a new government of national unity and act against Islamic State. Libyan representatives at a peace conference in Rome on Sunday pledged to sign a UN-brokered deal Wednesday that would be “the only legitimate basis for a solution” to the country’s crisis, said U.S. Secretary of State John Kerry. The OPEC member’s oil production has shrunk to about 375,000 barrels a day from 1.6 million a day before the 2011 rebellion that toppled Muammar Qaddafi.
Money managers’ short position on WTI futures and options rose 5.8 percent to 181,849 contracts in the week ended Dec. 8, according to CFTC data Friday. Net longs retreated to a five-year low.
U.S. natural gas for January delivery tumbled to the lowest level since January 2002 amid forecasts that mild weather will persist through the end of the month. Futures fell as much as 5.5 percent to $1.881 per million British thermal units on the Nymex.
Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal
Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.
Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.
While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.
“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.
“Gold remains an yield story and that yield story is very much tied back to the tapering story.”
A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.
“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.
A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.
Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.
Silver rose 0.9% to $22.61 per ounce.
Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
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