Oil heads for longest weekly losing streak since 1986 amid glut

Oil heads for longest weekly losing streak since 1986 amid glut

By BEN SHARPLES

MELBOURNE (Bloomberg) -- Oil headed for the longest run of weekly declines since March 1986 as OPEC forecast weaker demand for its crude, adding to signs that a global supply glut that spurred last year’s price collapse may persist.

Futures swung between gains and losses in New York and are set for an eighth weekly drop. Demand for oil from the Organization of Petroleum Exporting Countries will average 28.8 MMbopd, the lowest in 12 years, the group said in a report on Jan. 15. Venezuela, one of OPEC’s 12 members, is seeking to coordinate a plan to calm prices, according to President Nicolas Maduro.

Oil fell almost 50% last year, the most since the 2008 financial crisis, as supplies swelled amid the fastest pace of U.S. production in more than three decades while OPEC resisted calls to cut output. Goldman Sachs Group  and Societe Generale SA were among banks to reduce their price forecasts this week.

“It’s a broader global poker game in oil markets -- the first to blink loses,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “OPEC has gotten away with its cartel actions for many decades now and there are clear signs that it’s no longer working. Their power over the oil price is being vastly eroded.”

West Texas Intermediate for February delivery was at $46.77/bbl in electronic trading on the New York Mercantile Exchange, up 52 cents, at 4:46 p.m. Singapore time on Jan. 16. The contract slid $2.23 to $46.25 on Jan. 15. The volume of all futures traded was about 34% above the 100-day average. Prices are down 3.3% this week.

U.S. Supply

Brent for March settlement was 49 cents higher at $48.76/bbl on the London-based ICE Futures Europe exchange. The February contract expired on Jan. 15 after decreasing $1.02 to $47.67. The European benchmark crude traded at a premium of $1.51 to WTI for the same month.

OPEC, which supplies about 40% of the world’s crude, pumped 30.2 MMbopd in December, an increase of 140,000 bbl led by gains in Iraq, according to the report. The group’s share of the global oil market will shrink to 31.2% this year from 31.9% in 2014, it estimated.

U.S. production rose to 9.19 MMbopd through Jan. 9, the fastest pace in weekly records dating back to January 1983, data from the Energy Information Administration show. Stockpiles climbed by 5.39 MMbbl to 387.8 MMbbl, according to the Energy Department’s statistical arm.

Venezuela, Russia

Venezuela plans to coordinate with OPEC and non-OPEC producers to restore “the normalization of prices” in the next few weeks, said Maduro.

The President met his Russian counterpart Vladimir Putin in Moscow to discuss global oil markets as the price slump threatened the economies of both countries. Venezuela, which holds the world’s biggest crude reserves, relies on oil sales for almost 95% of foreign currency earnings, while Russia is the largest producer globally.

Prices need to drop further and stay there for the first half of this year for supply and demand to “re-balance,” said Goldman. The “war” for market share means oil is skewed to the downside, Australia & New Zealand Banking Group predicted on Jan. 15.

WTI may extend losses next week, a Bloomberg News survey shows. Twenty one of 40 analysts and traders, or 53%, forecast crude will decline through Jan. 23 while 11 said futures will advance.