Oil Heads for Third Weekly Loss After New Signs of Inventory Building

Traders are preparing for even lower crude prices next year, taking up increasing amounts of put options to sell USA crude in February should prices fall to $30, $25 or even $20 per barrel, according to Reuters data. A resurgent Iran may present a greater threat as it prepares to dump a million barrels on the market next year.

While that competition has been a boon for consumers and sent US drivers onto the road in droves, it has also sent many producers on a path toward bankruptcy and troubled several financial markets.

The world’s biggest oil producers in OPEC added to Thursday’s bearish sentiment, forecasting scant chance for a meaningful oil price rise in 2016. The White House on Wednesday announced its support for a deal reached by congressional leaders that would end the nation’s 40-year restrictions on crude exports and the move is expected to be a boon for trading companies as it will open up a major new market. A stronger greenback dents demand for dollar-denominated oil in global markets.

“All new production will be earmarked for exports”, BMI Research said in a note.

Both benchmarks have fallen every day since the Organization of the Petroleum Exporting Countries on December 4 abandoned its output ceiling.

A day earlier, London-traded Brent plunged $1.34, or 3.41%, as worries that a global supply glut may stick around for longer than anticipated continued to weigh.

“Immediate physical implications are relatively minor given the narrow spread between [West Texas Intermediate] and Brent”, said Jamie Webster, a Washington-based senior director at IHS Energy.

WTI January, the front-month contract, settled down almost 5 percent, or US$1.83, at US$35.52 a barrel.

The likely lifting of the ban has seen Brent crude’s premium to WTI nearly vanish.

The EIA data showed crude inventories rose 4.8 million barrels last week to near record highs, while analysts in a Reuters poll had forecast a drop of 1.4 million barrels. “This is possibly crude from the Atlantic basin”.

OPEC, which controls about 40 percent of global oil production, has been quick to dismiss any concerns. “This will have no effect on the price because the US still is an importing country”.

“But amidst all this doom and gloom, one should be wary of a surprise rally given, for example, that (oil) prices are severely oversold”.

Georgi Kantchev and Jenny W. Hsu contributed to this article.