Oil sank to a three-month low on indicators signaling the persistence of a global supply glut. Brent futures lost as much as 1.4 percent, falling to the lowest level since Aug. 11. Brent for January settlement fell as much as 61 cents to $44.14 a barrel, retreating from more than $52 a barrel over the past 3 1/2 weeks. The global benchmark traded at a premium of 71 cents to West Texas Intermediate for January.
WTI for December delivery was down 58 cents at $42.83 a barrel on the New York Mercantile Exchange. Nymex reformulated gasoline blendstock futures fell 0.66 percent to $1.30 a gallon, while December diesel traded down 0.37 percent at $1.40.
Iran has increased output at three fields faster than expected, expanding output to 250,000 barrels a day from 65,000 in 2013. Iran told OPEC that it raised total production last month by 210,000 barrels a day to 3.92 million. Libya and Nigeria are also on the verge of bringing significant additional volumes to the market. U.S. explorers operated the most rigs since February, adding more than 130 rigs since May. China’s crude output slipped 2.7 percent last month to about 3.795 million barrels a day, the lowest in more than seven years.
Saudi Arabia said the Organization of Petroleum Exporting Countries must agree at its Nov. 30 meeting in Vienna to trim output to stabilize markets. Saudi Arabia’s Energy Minister Khalid Al-Falih and his Algerian counterpart Noureddine Boutarfa are both optimistic that a deal to cut output will be put into effect. However, most observers remain skeptical that OPEC will be able to dig itself out of the hole it now finds itself in, as it becomes more apparent that the proposed cuts are almost impossible to impose and enforce.
It is believed that the group needs to achieve a ceiling of 32.5 million to 33 million barrels a day to slow or halt the falling prices. Failure to implement a deal could drag crude prices down to as low as $35 a barrel.
OPEC members produced 33.64 million barrels a day in October. OPEC’s estimates put non-OPEC production next year at an average daily of 56.43 million barrels. This would give the world almost 91 million barrels of oil per day when added to OPEC’s October rate of production. OPEC expects global oil demand next year to hit 95.55 million barrels of crude per day.
Global oversupply has reached about 950,000 barrels a day and OPEC forecast an even larger global surplus in 2017. According to the group, non-OPEC supply this year would be about 780,000 barrels lower than it was in 2015, but this is expected to rise in 2017. It remains unclear just how much crude is currently being kept in storage and how long it will take to get rid of however much that is.