Oil Prices Tumble as OPEC Production Grows
OPEC reports that its output rose to a more-than-three-year-high in September
Oil prices dropped Monday after the Organization of the Petroleum Exporting Countries reported that its output rose to a more-than-three-year high last month.
OPEC said in a monthly report released Monday that it produced 31.57 million barrels a day in September, up about 109,000 barrels a day from August and above the group’s target of 30 million barrels a day. The group’s output was the highest reported level since April 2012.
Prices plunged in late 2014 after a boom in U.S. oil drilling pushed the global crude market into oversupply. Since then, U.S. production has started to fall as companies have cut spending on new drilling. But OPEC and other countries have ramped up their production in an effort to maintain market share, keeping prices under pressure.
“There’s plenty of cargoes” of crude oil being sold, said Ric Navy, senior vice president for energy futures at brokerage R.J. O’Brien & Associates LLC. “The bottom line is that there’s still a lot of [crude] available.”
Light, sweet crude for November delivery settled down $2.53, or 5.1%, at $47.10 a barrel on the New York Mercantile Exchange. The contract posted the biggest one-day percentage decline since Sept. 1.
Brent, the global benchmark, fell $2.79, or 5.3%, to $49.86 a barrel on ICE Futures Europe.
OPEC also said it expects U.S. production to fall on an annual basis next year for the first time in eight years, increasing demand for OPEC crude to 30.8 million barrels a day.
Trading volumes were lower than normal on Monday because of federal holidays in Canada and the U.S. “This move lower is happening on pretty light volume,” said Teddy Sloup, market strategist at brokerage iiTrader in Chicago. “We would rather wait until tomorrow or Wednesday to really believe this selloff. I don’t think we believe it just yet.”
U.S. oil prices rose above $50 a barrel during intraday trading last week amid a strong rally driven by expectations of a continued decline in U.S. production. The benchmark last settled above $50 a barrel in July.
But last week’s rally brought new sellers into the market, capping price gains, as producers seized the opportunity to lock in prices for oil they plan to sell in the coming months or years. John Saucer, vice president of research and analysis at Mobius Risk Group, a Houston firm that helps producers manage risk, said Friday that he saw an uptick in hedging activity last week.
Traders are also waiting on earnings from U.S. oil companies, which are expected to show big declines because of low oil prices. The energy sector of the S&P 500 is expected to post a 64.5% decline in earnings in the third quarter compared with a year ago.
Gasoline futures settled down 7.56 cents, or 5.3%, at $1.3411 a gallon. Diesel futures fell 8.85 cents, or 5.6%, to $1.5024 a gallon.
Read more: OPEC Monthly Oil Market Report
Source: WSJ – Oil Prices Tumble as OPEC Production Grows
