Oil dives lower as surging US output overshadows Opec+ curbs

Crude

SEOUL: Oil dived lower toward US$49 a barrel as investors seek more assurance that Opec’s output cuts will work in the face of surging American supplies.

Futures in New York slipped as much as 1.5 percent, after plunging 5.1 percent over the past two sessions and closing below US$50 on Monday for the first time since October 2017. 

The slide accelerated after everyone from the US Energy Department to data provider Genscape Inc. predicted higher American supplies, while uncertainties persist over the effectiveness of curbs by the Opec+ coalition that includes Saudi Arabia and Russia.

Crude’s mired in a bear market as skepticism grows over how the pledged output cuts by the Organization of Petroleum Exporting Countries and its allies will be implemented. 

Mounting fears over the relentless growth in U.S. shale, which veteran crude trader Andy Hall says is making it hard to predict global supplies, has also undermined efforts to balance the market by major exporters including Saudi Arabia and Russia.

“Markets are confused and looking for some clear direction at the moment,” said Daniel Hynes, a Sydney-based senior commodities strategist at Australia & New Zealand Banking Group Ltd. 

“Shorts are still keen to drive things lower until the data starts indicating the market is tightening.”

West Texas Intermediate for January delivery fell as much as 74 cents to US$49.14 a barrel on the New York Mercantile Exchange, and was at US$49.38 at 12:04 p.m. in Seoul. The contract closed 2.6 percent lower at US$49.88 on Monday. Total volume traded was about 6 percent above the 100-day average.

Brent for February settlement lost 61 cents, or 1 percent, to US$59 a barrel on London’s ICE Futures Europe exchange. Prices dropped 1.1 percent to settle at US$59.61 on Monday. The global benchmark crude traded at a US$9.33 premium to WTI for the same month.

Genscape was said to report inventories at America’s biggest storage hub in Cushing, Oklahoma, are growing, while the Energy Information Administration said it sees output at major U.S. shale plays at 8.166 million barrels a day in January and boosted its December forecast to 8.03 million.

Meanwhile, the median estimate of eight analysts surveyed by Bloomberg showed nationwide stockpiles probably decreased 3.25 million barrels in the week ending Dec. 14. Still, inventories at Cushing probably rose by 1.3 million barrels last week, according to a separate forecast compiled by Bloomberg. - Bloomberg