Oil extends drop from 5 1/2-year low on supply glut speculation

Iraq energy news
Iraq energy news

Oil fell for a third day, extending its drop from the lowest close since 2009 amid speculation a global supply glut that’s driven crude into a bear market may persist this year.

Futures slid as much as 2% in London, after losing 5.1%  last week.

Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, plans to boost crude exports this month, the oil ministry said.

Sanford C. Bernstein cut its Brent forecasts for this year, citing increases in global spare capacity and rising inventories.

Brent slumped 48% last year, the most since the 2008 financial crisis, as OPEC resisted calls to cut output amid a battle with US shale producers for market share.

The 12-member group, which supplies about 40% of the world’s crude, pumped above its target for a seventh straight month in December, according to a survey.

“Iraq’s crude production is one of the contributors to the glut we’ve been seeing,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said.

“The glut is expected to continue if demand fails to catch up with supply.”

Brent for February settlement declined as much as $1.15 to $55.27 a barrel on the London-based ICE Futures Europe exchange, and was at $55.38 at 3 p.m. Singapore time.

The contract fell 91 cents to $56.42 on January 2, the lowest close since May 2009.

The European benchmark grade traded at a premium of $3.79 to West Texas Intermediate.

WTI for February delivery dropped as much as $1.29, or 2.5%, to $51.40 a barrel in electronic trading on the New York Mercantile Exchange. It slid 58 cents to $52.69 on January 2, the lowest close since April 2009.

The volume of all futures traded was almost double the 100-day average.

Iraq plans to expand crude exports to 3.3 million barrels a day this month, Asim Jihad, a spokesman at the oil ministry in Baghdad, said.

The country exported 2.94million a day in December, the most since the 1980s, he said.

Iraq reached an agreement with its semi-autonomous Kurdish region last month over oil exports through Turkey, after years of disagreement on the territory’s right to independently develop its energy resources.

The pact allows as much as 550,000 barrels a day from northern Iraq to be shipped to the Mediterranean port of Ceyhan, along a pipeline to the Turkish border operated by the Kurdistan Regional Government.

Brent will trade at $80 a barrel this year, down from a earlier estimate of $104, Bernstein said.

The researcher also reduced its prediction for 2016 to $90 from $109 previously.

Venezuela President Nicolas Maduro is traveling to China for talks on financing and energy and plans to visit other OPEC member nations to develop an oil-pricing strategy.

Maduro is seeking to pull his country from recession, as the collapse in oil prices and shrinking gross domestic product sap government revenue.

He’ll meet Chinese President Xi Jinping as he seeks to “confront” the decline in Venezuela’s income.

Oil’s slide has forced the government in Caracas to review “all investment plans” and seek new ways to obtain foreign currency, Maduro said.

In Russia, the world’s largest crude producer, output rose by 0.3% in December to 10.667 million barrels a day, a post-Soviet record, according to preliminary data e-mailed by CDU-TEK, part of the Energy Ministry.