Oil declined to the lowest level since 2008 in London amid estimates that OPEC’s decision to scrap production limits will keep the market oversupplied.
Brent futures declined as much as 3 percent for a sixth consecutive loss.
The global surplus will persist at least until late 2016 as demand growth slows and the Organization of Petroleum Exporting Countries shows “renewed determination” to maximize production, the International Energy Agency said Friday. The group chose not to curb output at its Dec. 4 meeting.
Oil prices have slumped to levels not seen since the global financial crisis as a result of OPEC’s strategy to defend market share against higher-cost producers.
The group’s production rose to a three-year high in November, it said in a report Thursday, as surging Iraqi volumes more than offset a slight pullback by Saudi Arabia.
“The hits keep on coming,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund. “It was bad enough that the OPEC meeting ended in disarray with no quota. Now we’re seeing just how aggressively everyone is fighting for market share.”
Brent for January settlement declined $1.12, or 2.8 percent, to $38.61 a barrel on the London-based ICE Futures Europe exchange at 10:04 a.m. in New York. The contract touched $38.55, the lowest since Dec. 31, 2008. It has decreased 10 percent this week. The volume of all futures traded was 21 percent above the 100-day average.
West Texas Intermediate for January delivery slipped 86 cents, or 2.3 percent, to $35.90 a barrel on the New York Mercantile Exchange. It reached $35.78 earlier, the lowest since February 2009. The U.S. benchmark crude was at a $2.71 discount to Brent.
OPEC is displaying hardened resolve to maintain sales volumes even as prices fall in an oversupplied market, the IEA said Friday in its monthly report. While its policy is hitting rivals, triggering the steepest drop in non-OPEC supply since 1992, world oil inventories will likely swell further once Iran restores exports on the completion of a deal to lift sanctions, it said.
“The level of output out of OPEC is spectacular,” Kilduff said. “There’s no end in sight for the global glut.”
ConocoPhillips will reduce capital spending by 25 percent next year to protect the highest dividend yield among major U.S. producers, the Houston-based company said Thursday. Its plan to cut spending to $7.7 billion comes a day after Chevron Corp. disclosed a 2016 budget 24 percent smaller than this year’s. Together, the reductions by the two companies totaled $10.9 billion, enough to rent 10 deepwater drilling rigs every day for more than half a decade.
Russia is preparing for the possibility that low crude prices are here to stay as competition between oil and other fuels such as natural gas intensifies.
The nation sees no reason for crude to rise above $50 a barrel anytime soon and predicts it will remain in a $40 to $60 range over the next seven years, Deputy Finance Minister Maxim Oreshkin said at a Moscow conference organized by Vedomosti.
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