Oil heads for seventh weekly loss on signs of global supply glut | Fin24
  • Illicit Tobacco Trade

    The SA Revenue Service says it is going to court to recover R200m in taxes in a decade-old case

  • SAA Strike

    The airline says it will take legal action over 'malicious' claims of unsafe flights by unions.

  • New CEO

    After months of speculation and delays, Andre de Ruyter has been named Eskom's new head.


Oil heads for seventh weekly loss on signs of global supply glut

Nov 23 2018 08:45
Sharon Cho, Bloomberg

Oil’s poised for a seventh weekly loss after Saudi Arabia signaled its output may have reached a record, while America’s growing crude stockpiles stoked concerns over a potential supply glut.

Futures retreated as much as 3.3 percent in New York, set for a 5.6% drop this week. Saudi Arabia is producing in excess of 10.7 million barrels a day, Energy Minister Khalid Al-Falih said, giving the strongest indication yet that the kingdom has boosted output to record levels. Meanwhile, US crude inventories rose for a ninth week in the longest run of gains since March 2017.

Crude collapsed into a bear market this month as America’s temporary waivers that allow some nations to continue importing Iranian oil boosted the prospect of higher global supplies. Oil’s volatility increased this week to the highest since 2016 as investors avoided risky assets including commodities amid US confrontation with China over trade. Meanwhile, President Donald Trump continues to demand OPEC to lower prices by pumping more.

“Prices have taken a dive as Trump continues to put pressure on OPEC and Saudi Arabia to create a low-price environment, and that has coupled with increasing American stockpiles,” said Hong Sungki, a Seoul-based commodities trader at NH Investment & Securities. “A potential game-changer will be what OPEC+ agrees to do in terms of supply.”

West Texas Intermediate for January delivery lost as much as $1.81 to $52.82 a barrel on the New York Mercantile Exchange, and was at $53.28 at 11:59 in Singapore. While there was no settlement on Thursday due to US Thanksgiving holiday, the contract is on course for the longest weekly losing streak since August.

Brent for January settlement fell 65 cents, or 1.04%, to $61.95 a barrel on the London-based ICE Futures Europe exchange. The contract headed for a seventh weekly drop, with a 7.2% loss. The global benchmark crude traded at a $8.70 premium to WTI for the same month, after closing on Thursday at the lowest premium since August 31.

Earlier this month the Organization of Petroleum Exporting Countries and allied producers warned that markets will probably be oversupplied in 2019, while American stockpiles expanded to the highest level since December 2017 last week. Meanwhile, US oil producers are pumping the most since at least March 1983, according to government data.

While indicating that Saudi Arabia is producing at record levels, Al-Falih at the same time said the world’s biggest exporter won’t oversupply the market. Demand for Saudi crude may be lower in January compared with December, he told reporters on Thursday at the mining complex of Wa’ad Al Shamal in northwestern Saudi Arabia.

Other oil-market news: It may take until February or even later for some of Iran’s biggest oil buyers such as  South Korea and Japan to resume purchases after winning waivers from the US as they seek to resolve complications over insurance, shipping and payments. Crude’s precipitous collapse has caught the attention of Chinese speculators as trading in the county’s domestic futures on Thursday was the heaviest since the contract was listed in March. Justin Trudeau’s government is unlikely to heed  Alberta’s plea for new trains to alleviate the country’s oil crisis, federal officials say.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

commodities  |  markets  |  oil


Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote