Oil price heads for seventh weekly decline as supply glut continues
iNVEZZ.com, Friday, January 09: Crude oil futures have risen for a third straight day so far in today’s trading session. Prices, however, still remain poised for a seventh consecutive weekly decline as major producers show no signs of reducing output in the face of a global supply glut.
Brent for February delivery had gained 14 cents, or 0.28 percent, to $51.10 per barrel as of 07:33 GMT on the London-based ICE Futures Europe exchange. On Wednesday, the contract dropped below the $50 level for the first time since May 2009. The benchmark has lost over 55 percent of its value since June.
Oil prices collapsed after the Organization of Petroleum Exporting Countries (OPEC), which provides about 40 percent of the world’s oil, refused to cut production in November. Yesterday, Bloomberg quoted Yousef Al Otaiba, United Arab Emirates’ (UAE) ambassador to the US as saying that his country could withstand current market condition for “a lot longer than people expect”. According to him: “This extra glut in the market is not coming from the OPEC members, so therefore why should the OPEC members have to cut their production?”
February WTI futures had risen 0.66 percent, or 32 cents, to $49.11 in electronic trading on the NYMEX in New York as of 07:33 GMT. The contract rallied over one percent in both of the previous two sessions after US inventories surprisingly contracted by 3.1 million barrels in the week to 2 January.
According to Reuters, BNP Paribas has now revised down its price forecasts for both WTI and Brent by more than $10 per barrel. The bank now expects WTI to average $55 this year, down $15 from its November forecast. BNP now sees Brent trading at $60 per barrel on average in 2015. According to the bank: “Supply issues will dominate demand in terms of fundamental factors, with the market focusing on how the current supply surplus will ultimately resolve itself”.
Based on the two front month contracts, Brent was trading at a premium of $1.99 to WTI as of 07:33 GMT, down 18 cents from yesterday’s $2.17 close. The ratio has declined 46 percent from last week, when it settled at $3.70.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.