USA oil plunges more than 2pc on supply glut woes

Nov 24, 2015, 00:52
USA oil plunges more than 2pc on supply glut woes

The overhang has seen Iraqi crude grades selling as low as $30 per barrel, while official selling prices from Nigeria have fallen to their lowest in more than a decade. "This would mean that oil prices should be holding steady this week and should mean that supports of $40 and $43 for WTI and Brent January 2016 should hold".

The loonie is likely to find resistance around 93.00 against the yen, 1.32 against the greenback, 1.40 against the euro and 0.95 against the aussie.

Crude rallied early after Saudi Arabia pledged to work towards oil price stability. The rebound soon lost steam, however, as analysts noted the remarks were in line with previous Saudi statements. Saudi Arabia has priced its oil at a six-year low for Europe after starting to ship crude to traditional Russian markets such as Poland.

Investors have kept a close eye on the total of domestic oil rigs online, amid forecasts for sharp declines in US output in 2016.

However, analysts say market participants remain nervous that oil majors, particularly those in the Organization of the Petroleum Exporting Countries, will continue to ramp up output amid low prices for the sake of defending market share.

On Friday, oil prices turned higher after industry group Baker Hughes reported that the US oil rig count fell by 10, sparking a few optimism that oil production in North America is tapering down.

BMI Research, part of the Fitch ratings agency, said: "What is underway now is a structural market rebalancing in which low oil prices clear out high cost production - a relatively small part of which is U.S. shale".

Anything positive regarding a fall in USA crude oil stocks could lead to a frenzied bout of trading after the announcement is made at 1530 GMT.

Benchmark front-month Brent futures for January fell 60 cents, or 1.34 per cent, to US$44.06 a barrel, after ending up 48 cents at US$44.66 a barrel on Friday. "The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC". That's because it wants to maintain, if not increase, its control of the oil market.

Hedge funds are betting OPEC won't do anything next month to keep crude oil above $40 a barrel. North Sea brent futures ended the week up 2.5%, after closing in the green in four of five sessions on the week.

Refinery rates rose while inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest USA oil- storage hub, increased for a second week to 56.9 million barrels.

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