by Samuel Robinson
New York | Oil’s unprecedented decline deepened as investors fled a market hammered by swelling excess supplies, a darkening demand outlook and US President Donald Trump’s Twitter critique of the world’s biggest crude exporter.
Futures plunged 6 per cent in New York and London on Tuesday. OPEC’s dire forecast for 2019 demand came at a time of steadily rising American production and stockpiles. Trump admonished Saudi Arabia for planning to curb output in a matter of weeks and lamented prices that dipped below $US57 a barrel for the first time since December.
“This tweet certainly did not help prices,” said Warren Patterson, a senior commodities strategist at ING Bank.
“Given the growing global surplus over the first half of 2019, OPEC will likely try to ignore President Trump’s call as much as possible.”
West Texas Intermediate futures have fallen for a record 12 sessions on fears of a supply glut similar to the price-killing surplus of 2014 is redeveloping. In London, Brent futures have declined in 11 of the past 12 sessions. Money managers’ combined bullish positions in WTI and Brent sank to the lowest in 14 months as of November 6, Commodity Futures Trading Commission data show, as long positions shrank and shorts increased.
“Today’s move is just capitulation,” said Nick Gentile, managing partner of commodity trading advisor NickJen Capital Management & Consulting in New York. “You’re getting a combination of the systematic CTAs, the trend following guys, adding to the shorts and global macro guys liquidating longs.”
WTI for December delivery dropped $US2.69 to $US57.24 a barrel at 12.48pm on the New York Mercantile Exchange. Total volume traded Tuesday was almost 60 per cent above the 100-day average.
Brent futures for January settlement fell $US3.06 to $US67.06 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $US9.73 premium to WTI for the same month.
A closely watched meeting between the Organisation of Petroleum Exporting Countries (OPEC) and its allies including Russia on Sunday yielded no formal change in output policy, but delegates warned they may need “new strategies”. Saudi Arabia also unveiled a plan over the weekend to reduce its own shipments by about 500,000 barrels a day next month.
Oil chiefs from Venezuela and Oman indicated they may side with the kingdom on the issue of output cuts. Russian Energy Minister Alexander Novak was less supportive, saying Monday that “we have to wait and see how the market is unfolding”.
“That reluctance yesterday and over the weekend by Russia to participate in coming together to cut 1 million barrels sent a negative signal to the market,” said John Kilduff, partner at Again Capital. “On top of it all, there’s tremendous dollar strength happening right now and over the past few days.”
The Bloomberg dollar spot Index touched the highest since May 2017 early on Tuesday, before slipping back.
The meeting in Abu Dhabi raised the odds of a production cut next month to “fairly high”, and the reduction may be in the 1 million-barrels-a-day range, according to RBC Capital Markets.
In the US, crude inventories stowed at the key pipeline nexus in Cushing, Oklahoma, rose by an estimated 2.5 million barrels last week.