Oil Sinks to Lowest in Almost 7 Years as Iran Vows More Supply
London (Dec 14) Oil extended declines from the lowest price since February 2009 as Iran pledged to boost crude exports, bolstering speculation OPEC members will exacerbate the global oversupply.
Futures dropped as much as 1.2 percent in New York, trading near $35 a barrel, after losing almost 11 percent last week, the most in a year. There’s “absolutely no chance” Iran will delay its plan to increase shipments even as prices decline, said Amir Hossein Zamaninia, the deputy oil minister for international and commerce affairs. Hedge funds and other large speculators raised bearish bets to an all-time high, U.S. Commodity Futures Trading Commission data showed.
Oil has slumped to levels last seen during the global financial crisis as the Organization of Petroleum Exporting Countries effectively abandoned production limits to defend market share, fueling a record surplus. The glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency.
“Gloom nourishes gloom,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The market is fully acknowledging that OPEC is no longer in price-control mode or providing a floor, and that the group is unlikely to change that strategy any time soon.”
WTI for January delivery fell as much as 43 cents to $35.19 a barrel on the New York Mercantile Exchange and was at $35.37 at 9:33 a.m. London time. The contract decreased $1.14 to $35.62 on Friday, the lowest settlement since February 2009.
The volume of all futures traded was 24 percent above the 100-day average. The aggregate volume of monthly WTI contracts on the Nymex climbed to a record of 1.596 million on the Nymex on Dec. 8. Each contract corresponds to 1,000 barrels of oil.
Brent for January settlement dropped as much as 66 cents, or 1.7 percent, at $37.27 a barrel on the London-based ICE Futures Europe exchange. It slid $1.80 to $37.93 on Friday, the lowest close since December 2008. The European benchmark crude was at a premium of $2.15 to WTI.
Iran, which expects international sanctions over its nuclear program to be lifted by the first week of January, has already secured customers for its planned supply expansion, Zamaninia said in an interview in Tehran. The government is also preparing to offer oil and natural gas contracts to investors. The country pumped 2.8 million barrels a day last month, data compiled by Bloomberg show.
“Our general assumption is on a market with low prices, so the price can drop as low as possible as we are prepared for the worst scenario,” Zamaninia said.
OPEC, which set aside its output quota at a Dec. 4 meeting, is displaying hardened resolve to maintain sales, the IEA said in its monthly report Friday. While the group’s strategy has affected other producers, triggering the steepest fall in non-OPEC supply since 1992, world oil inventories will probably swell further once Iran restores exports, predicted the Paris-based energy adviser to developed economies.
World powers said they persuaded some of Libya’s feuding factions to form a new government of national unity and act against Islamic State. Libyan representatives at a peace conference in Rome on Sunday pledged to sign a UN-brokered deal Wednesday that would be “the only legitimate basis for a solution” to the country’s crisis, said U.S. Secretary of State John Kerry. The OPEC member’s oil production has shrunk to about 375,000 barrels a day from 1.6 million a day before the 2011 rebellion that toppled Muammar Qaddafi.
Money managers’ short position on WTI futures and options rose 5.8 percent to 181,849 contracts in the week ended Dec. 8, according to CFTC data Friday. Net longs retreated to a five-year low.