Oil falls on global glut even as US growth picks up momentum

MOSCOW: Oil slid from the highest close in more than a week amid concern that the strengthening US economy won’t boost demand enough to clear a global glut.

Brent crude declined as much as 2.9% in London, extending this year’s decline to 46%. Opec will have to “step in” if prices continue to fall, Iraqi oil minister Adel Abdul Mahdi said on December 23 in an interview. Gross domestic product in the US, the world’s biggest consumer, rose at a 5% annual rate from July through September, the most since 2003, according to revised Commerce Department data.

Oil is heading for the biggest annual decline since 2008 amid a global glut exacerbated by the highest US output in more than three decades. Prices have dropped about 20% since the Organization of Petroleum Exporting Countries decided on November 27 to maintain its output ceiling at 30 million barrels a day. The market is oversupplied by 2 million barrels a day, Qatar’s energy minister Mohammed Al Sada said on December 21.

“The positive US economic numbers only had a short-term effect on the market as growth there won’t lead to an increase in consumption,” Thina Saltvedt, an analyst at Oslo-based Nordea Markets, said by phone. “Globally, there is still an oversupply of crude.”

Brent for February settlement slid as much as $1.76 to $59.93 a barrel on the London-based ICE Futures Europe exchange and was at $60.15 at 9:07 a.m. in New York. The contract climbed $1.58 to $61.69 yesterday, the highest close since December 12. The volume of all futures traded was 63% below the 100-day average for the time of day.

WTI for February delivery slid as much as $1.49 and was last at $55.91 a barrel on the New York Mercantile Exchange. The European benchmark crude traded at a premium of $4.29 to WTI.

US crude inventories probably fell to 377.4 million barrels in the week ended December 19, according to the median estimate in a Bloomberg survey of nine analysts.

Production accelerated to 9.14 million a day through December 12, the most in weekly data that started in January 1983.

Opec, whose 12 members supply about 40% of the world’s oil, pumped 30.56 million barrels a day in November, a separate Bloomberg survey of companies, producers and analysts showed. That exceeded their collective target of 30 million for a sixth straight month.

The “fair price” of oil that was $100 to $105 a barrel is now closer to $70 to $80 a barrel, Abdul Mahdi said. Iraq’s cabinet yesterday approved a budget based on $60 oil.