Good for me and bad for the Oil Patch. Global benchmark Brent crude steadied, but U.S. oil fell below $70 Friday after OPEC triggered the biggest one-day plunge in three years Thursday by failing to cut its output in response to a glut. Brent Futures rose 0.6 percent in London, having declined 9.1 percent this week. The Organization of the Petroleum Exporting Countries will maintain its collective output target at 30 million barrels a day, Saudi Arabia’s Oil Minister Ali Al-Naimi said after discussions in Vienna Thursday. The group’s policy will ensure a crash in the U.S. shale industry, predicted Leonid Fedun, the vice president of Russia’s OAO Lukoil. “Welcome to the new world of oil,” Mark Keenan, the Singapore-based head of commodities research for Asia at Societe Generale SA, said by phone. “OPEC has relinquished the role of balancing the market. If they had cut production and prices had increased then they would, by definition, be losing market share. They would be encouraging and supporting further shale production. For them, short-term pain for long-term gain.” Crude has collapsed into a bear market amid the fastest pace of U.S. production in three decades and signs of weakening global demand. OPEC wants a fair price and isn’t “sending any signals to anybody,” Secretary-General Abdalla El-Badri said. The 12-member group, which pumps 40 percent of the world’s oil, will convene again June 5 in the Austrian capital. “The price floor has been lowered,” Olivier Jakob, managing director of researcher Petromatrix GmbH, said by phone from Paris. “Saudi Arabia was always seen as the support of last resort and it’s a signal it’s not able to react” to rising supplies, he said. Brent for January settlement reversed an earlier loss of as much as 2 percent to trade at $73.04 a barrel on the London- based ICE Futures Europe exchange early Friday. The contract dropped $5.17 to $72.58 Thursday, the lowest close since August 2010. Total volume traded was 46 percent more than the 100-day average for the time of day. Prices have decreased 15 percent this month and 34 percent in 2014. U.S. benchmark West Texas Intermediate declined $5.54 to $68.15 in midday trading on the New York Mercantile Exchange. OPEC’s decision not to reduce production creates potential for further declines in oil prices, Goldman Sachs Group Inc. said in an e-mailed report. Citing its expectation of a “large market surplus” in the first half of next year, the bank maintained its 2015 Brent forecast at $80 to $85 a barrel and WTI at $70 to $75.
Posted on: Sat, 29 Nov 2014 14:24:36 +0000
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