Oil slumped to the lowest in a year after Saudi Arabia signaled its output may have reached a record high, while growing U.S. stockpiles stoked concerns over a potential supply glut.
Futures retreated as much as 5.3 percent from their Nov. 21 settlement in New York, and are set for a seventh weekly decline. Saudi Arabia is producing in excess of 10.7 million barrels a day, Energy Minister Khalid Al-Falih said Thursday, giving the strongest indication yet that the kingdom has boosted output to record levels. U.S. crude inventories have increased nine straight weeks in the longest run of gains since March 2017.
Crude collapsed into a bear market this month after the U.S. allowed some nations to continue buying Iranian crude. Trade tension between America and China is raising concerns over demand and President Donald Trump has renewed his call on Saudi Arabia to lower prices further. These factors pushed up oil’s volatility this week to the highest since 2016.
“Prices have taken a dive as Trump continues to put pressure on OPEC and Saudi Arabia to create a low-price environment, and that has coupled with increasing American stockpiles,” said Hong Sungki, a Seoul-based commodities trader at NH Investment & Securities Co. “A potential game-changer will be what OPEC+ agrees to do in terms of supply.”
West Texas Intermediate for January delivery lost as much as $2.90 to $51.73 a barrel on the New York Mercantile Exchange, and was at $52.11 at 10:45 a.m. in London. The contract is on course for a 7.8 percent decline this week, the longest weekly stretch of drops since August. There was no settlement on Thursday due to U.S. Thanksgiving holiday.
Brent for January settlement fell $1.90, or 3 percent, to $60.70 a barrel on the London-based ICE Futures Europe exchange. The contract headed for a seventh weekly drop, with a 9.2 percent loss. The global benchmark crude traded at a $8.67 premium to WTI. Total volume traded was 48 percent above the 100-day average.
Earlier this month, the Organization of Petroleum Exporting Countries and allied producers warned that markets will probably be oversupplied in 2019. U.S. stockpiles expanded to the highest level since December 2017 last week and oil producers there are producing at the highest rate since at least March 1983, according to government data.
While indicating that Saudi Arabia is producing at record levels, Al-Falih said the world’s biggest exporter won’t oversupply the market. Demand for Saudi crude may be lower in January compared with December, he told reporters on Thursday.
Other oil-market news: It may take until February or even later for some of Iran’s biggest oil buyers such as South Korea and Japan to resume purchases after winning waivers from the U.S. as they seek to resolve complications over insurance, shipping and payments. The Bloomberg Commodity Index fell as much as 1.7 percent and is set for a sixth weekly drop in seven. Chinese oil refiners are said to have resumed their purchases of Iranian crude scheduled to be shipped in November. Crude’s precipitous collapse has caught the attention of Chinese speculators as trading in the county’s domestic futures Thursday was the heaviest since the contract was listed in March.