The Sunday Mail
COMMODITY producers led European stocks to their worst week since 2012 as US benchmark oil extended declines below US$60 a barrel.
Norway’s krone weakened and Russia’s ruble slid to a record low, while a surge in government bonds sent yields in Europe to all-time lows.
The Stoxx Europe 600 Index dropped 1,4 percent at 9:56am in London on Friday. Standard & Poor’s 500 Index futures slipped 0,5 percent, with the gauge set to end seven weeks of gains.
West Texas Intermediate crude lost 1,7 percent to US$58,94 a barrel. The krone weakened 0,7 percent against the dollar after an interest-rate cut.
The cost of insuring Russian government debt rose for a 15th day, the longest streak on record.
The yield on 30-year German bunds slid as much as six basis points to a record 1,465 percent and France’s reached 1,931 percent.
Oil is headed for the 10th weekly drop since the start of October after OPEC decided against reducing its output, even as the highest US production in more than three decades exacerbates a global glut.
Global oil demand next year will be weaker than previously estimated and supply from non-OPEC producers will be bigger, the International Energy Agency said in a report.
While the lower fuel prices hurts producers, that’s boosting demand for bonds as central banks maintain stimulus to thwart deflation.
“Plummeting crude prices will benefit main oil consumers including the US, India and Indonesia, while hurting countries like Russia and those in the Middle East,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc in Seoul, said.
“For Japan and European nations who are concerned about deflation, decreasing oil prices gives them room to more aggressively ease monetary policy.”
Brent for January settlement slid as much as USc78, or 1,2 percent, to US$62,90 a barrel on the London-based ICE Futures Europe exchange.
The European benchmark crude traded at a premium of US$3,98 to WTI, compared with US$3,23 at the end of last week. Prices are down 8,4 percent this week and 43 percent lower in 2014.
OPEC, which supplies about 40 percent of the world’s oil, maintained its output target at 30 million barrels a day at a November 27 meeting, resisting calls from members including Venezuela to reduce quotas.
The Latin American nation wants special discussions to be held before the group gathers again on June 5, Foreign Minister Rafael Ramirez said on the Telesur network on December 10.
Iraq’s pricing of its Basrah Light grade is “based on the market structure for both oil products and crude oil”, the state-owned Oil Marketing Co. said in an e-mailed statement yesterday. “There is no basis for a ‘price war’.”
The global oil market will correct itself, Saudi Arabian oil minister Ali Al-Naimi said in Lima, Peru.
Production in the US expanded to 9,12 million barrels a day through December 5, data from the Energy Information Administration shows. That’s the fastest rate in weekly records that started in January 1983, according to the energy department’s statistical arm.
“The supply outlook has driven prices to these levels and the market is now looking for a base, where it thinks shale supply growth will be reined in,” Mark Keenan, the Singapore-based head of commodities research for Asia at Societe Generale SA, said on Friday.
“From a technical standpoint, the market is in a very clear down-trend.”
The US oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford in Texas and the Bakken in North Dakota.
Global demand for OPEC’s crude will shrink by 300 000 barrels a day to 28,9 million next year, the least since 2003, the group predicted in its monthly report on December 10. Its 12 members pumped 30,56 million a day in November, exceeding their collective target for a sixth straight month, a separate Bloomberg survey of companies, producers and analysts showed.
Oil may fall to as low as US$40 a barrel amid a price war or if divisions emerge in OPEC, Mohammad Sadegh Memarian, the head of petroleum market analysis at Iran’s Oil Ministry, said. The Persian Gulf nation is the fifth-largest OPEC producer.
Crude will trade at about US$65 for six or seven months until OPEC changes its output policy, a recovery in world economic growth becomes clearer, or geopolitical tension arises, Nizar Al-Adsani, Kuwait Petroleum Corp’s chief executive officer, said December 8. — Bloomberg.
