CRUDE OIL ERASES ADVANCE ON OPEC'S REDUCED DEMAND FORECAST

[Wiljor]

Oil fell for the fourth time in five days as OPEC said it expects weaker demand for its crude and U.S. output climbed to the highest in records dating to January 1983.

West Texas Intermediate futures erased a 5.8 percent gain. Demand for oil from the Organization of Petroleum Exporting Countries will average 28.8 million barrels a day, about 100,000 barrels less than forecast last month, the Vienna-based organization said in a monthly report. U.S. output surged to 9.19 million barrels a day last week, the Energy Information Administration reported yesterday.

Crude slid almost 50 percent last year, the most since the 2008 financial crisis, as OPEC resisted calls to cut its output ceiling amid the U.S. shale boom, exacerbating a global surplus.

“When the market extends itself too far, we’ll see some short-covering rally, and when the pressure evaporates, we’ll continue see prices moving lower,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “That’s what we are witnessing now.”

West Texas Intermediate for February delivery fell 7 cents to $48.41 a barrel at 10:23 a.m. on the New York Mercantile Exchange after climbing to $51.27. The intraday low was $47.16. The contract advanced 5.6 percent to $48.48 yesterday, the most since June 2012. The volume of all futures traded was more than three times the 100-day average for the time of day.

Brent for February settlement, which expires today, fell 7 cents to $48.62 a barrel on the London-based ICE Futures Europe exchange. The more active March futures advanced 18 cents to $50.04.

OPEC Output

OPEC kept its output above quota for a seventh month in December, according to data compiled by Bloomberg. The group, which pumps about 40 percent of the world’s oil, decided to maintain its output target at 30 million barrels a day at a Nov. 27 meeting in Vienna.

OPEC boosted its 2015 estimate for U.S. oil production in the monthly report today. It said annual growth will be slower than previously estimated as lower prices lead to investment cuts and less drilling.

“When you see another record production from the U.S. last week despite a 12 percent cut in rig counts, it does not give much hope for OPEC that reductions will come from the U.S.,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail.

Spread Narrows

Brent traded below WTI this week for the first time since July 2013, indicating that Saudi Arabia’s strategy of curbing American shale output growth is working, according to Societe Generale SA. The difference reflects that oil storage capacity is more readily available in the U.S. than elsewhere, according to Citigroup Inc.

U.S. crude production increased by 60,000 barrels a day in the week ended Jan. 9, the EIA reported yesterday. Stockpiles expanded by 5.39 million barrels to 387.8 million, more than 9 percent above the five-year average for this time of year, according to the Energy Department’s statistical arm.

U.S. oil rig count declined 61 in the week ended Jan. 9 to 1,421, the lowest level since February, according to Baker Hughes Inc. The amount reached a record 1,609 in the week ended Oct. 10.

“It’s going to take months before you see U.S. production slowing down,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “Nothing fundamental has changed.”

Bloomberg.com

[temperament5]

Brinkmanship at its best!