US crude futures plunge $4.24/bbl on downbeat OPEC forecast

Ignacio Sotolongo

13-Nov-2018

HOUSTON (ICIS)–NYMEX WTI crude futures for December delivery finished lower for the 12th consecutive session on Tuesday, settling at $55.69/bbl, down $4.24, after OPEC lowered for the fourth consecutive month its outlook for global oil demand.

In its monthly report, OPEC projected a supply glut for 2019 in response to rising non-OPEC production, led mainly by growth in US shale output, while global economic growth declines.

Oil prices have been falling after Iran’s sanctions failed to remove as much oil from the market as expected since the US granted temporary waivers to eight countries.

As a result of the US-China trade war, bearish sentiment has grown by raising concerns that it would impact global economic growth and energy demand.

In an attempt to add to the bearish mood, US President Donald Trump complained that oil prices were still too high and asked OPEC not to raise production.

Hedge funds have engaged in aggressive length liquidation, cutting long positions to the lowest level in almost two years.

US crude inventories were expected to show a build for the eighth consecutive week after the data is released by the American Petroleum Institute (API) and the Energy Information Administration (EIA) a day later as a result of the Monday Veterans Day holiday.

Downside momentum penetrated technical support barriers, triggering sell stops and extending the losses.

In the absence of upbeat news, OPEC and its allies, mainly Russia, will be considering trimming output during the quarterly full ministerial meeting in Vienna, Austria on 6 December.

The feeding frenzy across the energy complex drove West Texas Intermediate (WTI), the US benchmark, down to hit an intra-day low of $55.62/bbl, down $4.31, before attempting to rebound but continued to slide in electronic trading afterwards. Inter-month spreads remained in contango, or front-to-back weakness which validates oversupply conditions.

January ICE Brent bottomed out at $65.36/bbl, and settled at $65.47/bbl, down $4.65, but also continued to work lower in search of a bottom afterwards.

Top picture: A crude oil pump
Pictures source: Shutterstock

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