West Texas Intermediate crude fell, trimming the biggest rally since August 2012 as investors weighed OPEC’s decision to let the market curb a global supply glut. Brent slid in London.
Futures dropped 0.7% in New York, decreasing for the fifth time in six days. The Organization of Petroleum Exporting Countries may hold an emergency meeting in the first quarter of next year, Venezuela’s Foreign Minister Rafael Ramirez said in an interview.
The group’s failure to cut output at a gathering last week bodes well for US producers, according to billionaire wildcatter Harold Hamm, a founding father of the nation’s shale boom.
Oil has collapsed into a bear market amid the highest Us output in more than three decades and signs of slowing global demand growth. OPEC, responsible for about 40% of the world’s supply, resisted calls from members including Venezuela and Iran to reduce its quota of 30 million barrels a day at a November 27 meeting in Vienna.
“The supply overhang will keep the corrections relatively subdued,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone today. “The whole dynamic of the market is toward lower prices.”
WTI for January delivery fell 47 cents to $68.53 a barrel in electronic trading on the New York Mercantile Exchange at 2:19 p.m. Singapore time. The contract rose 4.3% to $69 yesterday, retracing a loss of as much as 3.7%. The volume of all futures traded was about 45% above the 100-day average. Prices are down 30% this year.
Brent for January settlement dropped as much as 70 cents, or 1%, to $71.84 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $3.68 to WTI, compared with $3.54 yesterday.
US oil producers can outlast OPEC countries that depend on higher crude prices to fund government budgets, Hamm, the chairman and chief executive officer of Continental Resources Inc., said in an interview yesterday. While drilling will slow as companies cut back, declining activity from Texas to North Dakota won’t be as harmful to the industry as some have feared, he predicted.
The US oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.
“The risk is still to the downside because the US is pumping at a mad rate,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “The market will be watching OPEC’s monthly reports to see what they’re doing with production.”
US output increased to 9.08 million barrels a day through November 21, the most in weekly records that started in January 1983, according to data from the Energy Information Administration. Crude inventories probably expanded by 1.5 million barrels last week, a survey shows before a report from the Energy Department’s statistical arm tomorrow.
OPEC exceeded its official target for a sixth straight month in November, even after reducing supply. The 12-member group pumped 30.56 million barrels a day, 424,000 barrels a day less than in October, according to a separate survey of oil companies, producers and analysts. It’s next scheduled to meet on June 5.
Brent futures will trade at $70 a barrel in 2015 and 2016 amid the global oversupply, according to Societe Generale SA, which cut its previous forecast by $20. WTI may average $65 in both years, it said in a report.