US, OPEC inventory reports send oil prices down

After falling more than US$1 on Wednesday, United States benchmark West Texas Intermediate for delivery in December dropped US$1.18, or 2.7 per cent, to US$41.75 a barrel on the NY Mercantile Exchange, a fresh low since late August.

Oil prices rose in early Asian trade on Tuesday after the head of OPEC forecast a more balanced market next year and the US energy department said domestic production is likely to fall for an eight consecutive month.

Brent for December settlement, which expires Friday, was 54 cents higher at $44.60 a barrel on the London-based ICE Futures Europe exchange.

Prices tumbled Wednesday after a report by the American Petroleum Institute showed USA commercial crude inventories had jumped by more than six million barrels.

ANZ also said that big price rebound this year was unlikely: “A year end recovery in commodity prices remains unlikely with a stronger US$ and EM (emerging market) growth concerns”.

According to secondary sources, OPEC production in October dropped 256,000 b/d to average 31.38 million b/d.

Despite the dark cloud hovering over the industry now, some anticipate a rebalancing in supply and demand in the next few years.

Oil prices resumed their decline in Asia today, with global crude oversupply continuing to dampen investors’ sentiment despite occasional rallies. “Intentional efforts to build or sell out government stockpiles that are not available to the market, nor included in demand figures, could help tighten the balance beyond headline implied stock changes”, Longson said. That would be the largest U.S. monthly import of Iraqi oil since mid-2012. It will eventually reach 103.5 million barrels per day by the year 2040.

It maintained its forecast for world oil demand growth in 2015, predicting it will rise by 1.5 million barrels per day (mb/d) to average 92.86 mb/d – a more conservative estimate than the IEA’s forecast of 1.8 mb/d in 2015. Its due to meet in Vienna on December 4 to discuss production.

Rising surplus amid slowing demand continues to weigh on prices, especially as major oil producers of the Organization of the Petroleum Exporting Countries stuck to the “no production cut” strategy with the aim that weakening margins will eventually knock out smaller competitors.