Oil falls as investors speculate on OPEC production cut
Posted on November 19, 2014 at 4:03 pm by Bloomberg in Crude oil, Gasoline, Markets, Middle East, Natural gas

(AP Photo/ Louis Lanzano)
Brent oil declined Wednesday amid investor speculation about the likelihood of OPEC making a production cut next week. West Texas Intermediate crude was little changed in New York.

The outcome of the meeting of the Organization of the Petroleum Exporting Countries hinges on the Nov. 24 deadline for talks on Iran’s nuclear program, Helima Croft, chief commodities strategist at RBC Capital, said in a note. Iran is seeking a deal with world powers that includes the easing or lifting of economic sanctions. The Iran talks and OPEC meeting are both taking place in Vienna.

“There’s an established bearish trend and nothing out there to stand in the way of a further move lower,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “I don’t think you’ll see aggressive position taking before the OPEC meeting. Volatility should be low.”

Brent for January settlement dropped 37 cents, or 0.5 percent, to end the session at $78.10 a barrel on the London- based ICE Futures Europe exchange. Prices have decreased 29 percent this year.

WTI for December delivery, which expires Thursday, fell 3 cents to settle at $74.58 a barrel on the New York Mercantile Exchange. The more-active January futures decreased 14 cents to $74.58. Volume was 24 percent lower than the 100-day average. January WTI closed at a $3.52 discount to Brent.

An OPEC production cut looks increasingly likely, Morgan Stanley analyst Adam Longson said in a report Wednesday. The 12- member group should cut output by 500,000 barrels a day, Libya’s OPEC governor Samir Kamal said Wednesday.

OPEC pumped 30.97 million barrels a day in October, exceeding its collective output target of 30 million barrels a day for a fifth straight month, data compiled by Bloomberg show.

“There are a lot of countervailing thoughts at work in the market right now,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone. “The likelihood of OPEC making a cut seems to be increasing. Taking just 500,000 barrels off the market would make a difference.”

Brent rose earlier after at least five people were killed when a car bomb exploded outside the governor’s office in Erbil, capital of Iraq’s Kurdish region, according to Iraqi media. The attack may be the start of a more sustained campaign by Islamic State against Kurdish fighters, said Nihat Ali Ozcan, an analyst at the Ankara-based Economic Policy Research Foundation.

Federal Reserve minutes showed some members said the central bank should remain attentive to the possibility prices in the U.S. economy aren’t rising fast enough. Fed Chair Janet Yellen and her colleagues last month focused on improvements in the labor market when they announced an end to their stimulative bond purchases.

Policy makers last month “pointed to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan,” in addition to a stronger dollar, according to a record of the Oct. 28-29 Federal Open Market Committee meeting released today in Washington.

“Prices climbed ahead of the Fed announcement,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “You saw a retreat afterwards as it became clear that the Fed is staying the course.”

U.S. crude supplies rose 2.61 million barrels to 381.1 million barrels, the highest level since the week ended July 4, according to an Energy Information Administration report Wednesday. It was projected to show supplies dropped 1.5 million barrels in the week ended Nov. 14, according to the median of 11 analyst responses in a Bloomberg survey.

“There’s plenty of domestic supply as today’s inventory data shows,” Adam Wise, who helps run a $6 billion oil and gas bond portfolio as a managing director at John Hancock in Boston, said by phone.

Crude inventories at Cushing, Okla., the delivery point for Nymex futures, rose 718,000 barrels to 23.2 million, a six- month high, the report showed.

U.S. crude output fell 59,000 barrels a day to 9 million in the latest week, according to the EIA, the Energy Department’s statistical arm. The nation pumped 9.06 million barrels a day in the seven days ended Nov. 7, the highest level in weekly data that started in 1983.

Gasoline futures rose 0.06 cent to close at $2.0438 a gallon in New York. Ultra low sulfur diesel fell 2.23 cents, or 0.9 percent, to settle at $2.359.

Gasoline supplies increased 1.03 million barrels to 204.6 million. Inventories of distillate fuel, a category that includes heating oil and diesel, fell 2.06 million barrels to 114.8 million, a six-month low.

Regular gasoline at U.S. pumps fell to the lowest level since November 2010. The average retail price slipped 1.2 cents to $2.863 a gallon Tuesday, according to AAA, the nation’s biggest motoring group. In Houston Wednesday, the average was $2.679 a gallon, down from $2.692 Tuesday.

Refineries operated at 91.2 percent of their capacity, up 1.1 percentage points from Nov. 7. U.S. refiners typically bolster operating rates in November after performing maintenance in September and October when fuel demand ebbs.

Also Wednesday, natural gas futures rose to the highest price in more than a week in New York as cold weather spurred demand for the heating-fuel.

Natural gas for December delivery gained 12.7 cents, or 3 percent, to $4.371 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Nov. 7.