SINGAPORE — Brent crude fell to just above $88 a barrel yesterday in a well-supplied market amid the fading expectation that Organisation of Petroleum Exporting Countries could cut output and shore up prices.The global oil benchmark has declined more than 20 percent from the 2014 high in June as supply rose and demand slowed in the US, Europe and China.
Investors expecting a production cut from Opec to support prices were disappointed as Saudi Arabia and Kuwait played down the possibility of the organisation reducing output.
Opec, which produces about 40 percent of the world’s crude oil, is due to meet in late November to discuss output targets.
“There’s been market chatter that Saudi Arabia is unlikely to cut production in the November meeting so that’s probably playing on the market,” ANZ commodity strategist Ankit Pahuja said in Melbourne.
“Seasonally, it’s a weak point. We think there’s more scope for recovery in November and December.”
Brent crude fell 72c a barrel to $88,17 by early morning yesterday after touching the lowest since December 2010 on Monday. The November contract expires tomorrow. US crude dropped 69c a barrel to $85,05 after it pared Monday’s sharp intra-day losses to settle down 8c.
“There was probably some positivity that came out of the Chinese data yesterday,” Mr Pahuja said.
“Underlying oil demand in the world’s top energy consumer was still ‘quite strong’”, he said.
China posted a strong rebound in commodities imports in September, including a 13 percent rise in crude oil imports from August.
Despite the recent price slump, several analysts expect oil markets to recover ahead of peak seasonal winter demand in the northern hemisphere.
“We see the potential for a positive bounce into year-end, particularly given extremely bearish sentiment and positioning,” Morgan Stanley analysts said in a note.
“Even if Opec is not overly responsive before year-end, which we expect, fundamentals have turned, which should eventually lift crude prices.”
Investors are looking ahead to weekly oil inventories data from the US for price direction. US commercial crude stocks were forecast to have increased in the week ended October 10, while refined products probably fell, according to a Reuters survey ahead of weekly inventory reports out of the world’s biggest oil consumer. Industry group, the American Petroleum Institute, will issue its report later today, and the US Department of Energy’s Energy Information Administration will follow with its weekly data tomorrow.
The reports have been delayed a day due to the Monday’s Columbus Day US federal holiday. – Reuters.