Crude Oil Drop Further; OPEC Output Sparks Sell-Off

Brent crude futures slipped below $38 a barrel for the first time since December 2008, trading down $1.69, or 4%, at $38.04 by 11:47 a.m. EST (1647 GMT) after a session low at $37.93.

“OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth”, said Michael Hewson, chief market strategist at CMC Markets.

The nation sees no reason for crude to rise above $50 a barrel anytime soon and predicts it will remain in a US$40 to US$60 range over the next seven years, Deputy Finance Minister Maxim Oreshkin said at a Moscow conference organized by Vedomosti.

Despite a year of depressed prices, global oil output in November had grown to 1.8-million barrels per day above levels since in November 2014, when the Organization of Petroleum Exporting Countries (OPEC) rattled markets by refusing to cut production to cope with an over-supplied market.

The U.S. benchmark rate was down 21 cents on Friday at $36.55 a barrel, its lowest since early 2009, when the global economy was sinking into recession.

Opec producers pumped more oil in November than in any month since late 2008, nearly 32 million barrels per day.

This was the highest level in three and a half years and beyond its 30 million ceiling target.

Oil demand is still expected to grow next year at an estimated 1.25 mln barrels a day, down from 1.53 mln barrels a day this year. USA crude was down 2.18 percent at $35.96 per barrel after hitting $35.78, its lowest since February 2009.

Opec warned that its “oil demand forecast for 2016 is subject to considerable uncertainties, depending on the pace of economic growth, development of oil prices, and weather conditions, as well as the impact of substitution and energy policy changes”.

The world’s largest oil cartel triggered a prolonged downturn in crude prices last November by ignoring calls to slash production in an effort to maintain market share.

OPEC’s monthly report says it expects non-member countries, mainly the U.S. to continue cutting back production, “mainly due to low oil prices and lower drilling activities”.

The agency anticipates that US domestic output will decline by 415,000 bpd, comprising almost 70% of the total non-OPEC declines.

Benchmark 10-year U.S. Treasury notes US10YT=RR were last up 24/32 in price to yield 2.153 percent, from a yield of 2.238 percent late Thursday. Moreover, Iran is adamant on increasing production following the lifting of trade sanctions, imposed in mid-2012. A move largely seen as created to put pressure on rivals, particularly shale oil producers in the U.S.

United States stocks rose even as U.S. crude prices continued to hover around seven-year lows and investors awaited the rate hike decision by the Fed.