Oil drops on supply glut despite cut in USA oil rigs

These OPEC countries can now sell their oil at a higher global price, which could work as a counter balance and mitigate the problems that face the oil market.

The U.S. Energy Information Administration estimates that in 2013 net exports from Venezuela totaled almost 1.7 million barrels per day of crude oil and petroleum products, a significant decrease since the peak of 3.1 million barrels per day in 1997.

“The problem for the oil market is that although [falling US output] has contributed to a narrowing of the statistical surplus of oil supply over demand, there has been no discernible slowdown yet in the pace of inventory accumulation”, analysts at Barclays said in a report.

“Markets are a bit fearful that Iranian oil could come in”. That’s because it wants to maintain, if not increase, its control of the oil market.

“It’s the statement”, SEB analyst Bjarne Schieldrop said.

However, should China allow for significantly faster FX depreciation than is now priced in by markets, we believe oil prices could fall further.

A few investors interpreted this as a sign that Saudi Arabia, the most influential member of OPEC, could push the oil cartel to curb its output and increase prices at its coming meeting on December 4.

Brent crude oil futures gained a few ground on Friday but remained near three-month lows as the pressure of a persistent supply glut limited optimism for a price recovery.

Meanwhile, Algeria’s energy earnings are forecast to fall to US$26.4 billion next year after low oil prices cut into the OPEC nation’s economy, Finance Minister Abderrahmane Benkhalfa said yesterday.

USA benchmark West Texas Intermediate for delivery in January shed US15c at $US41.75 a barrel on the NY Mercantile Exchange on Monday. WTI futures for December delivery were up 19 cents at, $40.74 a barrel, paring earlier losses, while WTI for January deliver held 92 cents higher, at $42.64 a barrel. Speculators turned the most bearish ever on gasoline and diesel as USA refiners increased production.

Money managers’ net-long position in WTI crude fell 17 percent in the week ended November 17 to the lowest in more than two months, data from the U.S. Commodity Futures Trading Commission show.

A growing discount between the front month and forward contracts (CLZ5-Z6), which was trading near a record wide $8 a barrel, has sparked talk of traders storing more crude in the hope of delivering later at higher prices.

However, if Saudi cannot resist the gravitational forces created by a persistently strong dollar and depegs the Saudi riyal to follow Russian Federation or Brazil, oil prices could collapse to $25 per barrel.