Oil extended losses below $40 a barrel amid speculation a record global glut will be prolonged as OPEC abandoned its long-time strategy of limiting production to control prices.
Futures dropped as much as 1.9 percent in New York after falling 4.2 percent last week. The Organization of Petroleum Exporting Countries will keep pumping about 31.5 million barrels a day, President Emmanuel Ibe Kachikwu said Friday after a meeting in Vienna. The group is setting aside its output quota of 30 million barrels a day, a target it’s breached since May 2014, until members gather again in June.
Oil has slumped 40 percent since Saudi Arabia led OPEC’s decision in November 2014 to maintain output and defend market share against higher-cost U.S. shale producers. Global stockpiles have expanded to almost 3 billion barrels as the Saudis, Russia and Iraq increased supply, according to the International Energy Agency.
“There is significant excess supply capacity around the world now that if OPEC give up their share, they’re just inviting someone else to take it,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “We’re far away from any situation where OPEC might actually change the current position and move back to restraining supply.”
West Texas Intermediate for January delivery declined as much as 77 cents to $39.20 a barrel on the New York Mercantile Exchange and was at $39.57 at 12:55 p.m. Hong Kong time. The contract decreased $1.11 to $39.97 on Friday. The volume of all futures traded was about 82 percent above the 100-day average. Prices are down 26 percent this year.
Brent for January settlement slid as much as 38 cents, or 0.9 percent, to $42.62 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $3.13 to WTI.
While OPEC has had a collective target of 30 million barrels a day since 2012, its members haven’t pumped below that level in 18 months. Most of the market “doesn’t have any ceiling,” Iraqi Oil Minister Adel Abdul Mahdi told reporters in Vienna. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”
After Friday’s decision, “everyone does whatever they want,” according to Iranian Oil Minister Bijan Namdar Zanganeh, who estimated the global surplus at as much as 2 million barrels a day. The Persian Gulf nation is seeking to boost crude exports next year when international sanctions over its nuclear program are removed.
The MSCI Asia Pacific Energy Index dropped as much as 1.8 percent, declining for a fourth day. Oil producers retreated, with PetroChina Co. falling as much as 1.6 percent in Hong Kong and Woodside Petroleum Ltd. losing as much as 3.6 percent in Sydney.