Oil dropped to six-year low in London on signs of discord in the Organisation of Petroleum Exporting Countries as ministers arrive in Vienna for a meeting.
A
majority of OPEC members agree on an output cut, with the exception of
Saudi Arabia and Gulf Arab countries, the Iranian Oil Ministry's Shana
news agency said. Saudi Arabia cut pricing on January oil sales to the
US, signalling the kingdom is fighting for market share. US crude
supplies rose to 489.4 million barrels, the most for this time of year
since 1930, government data show. The surging dollar helped spur a broad
commodity slump.
Oil has slumped
about 40 per cent since Saudi Arabia led OPEC's decision a year ago to
maintain output and defend market share against higher-cost shale
producers. Saudi Arabia will consider all issues at the Friday
gathering, Oil Minister Ali al-Naimi said. Iranian Oil Minister Bijan
Namdar Zanganeh sent a letter to the group calling for a cut in excess
supply, causing a brief rise in the oil market Wednesday.
Brent
for January settlement fell $US1.95, or 4.4 per cent, to $US42.49 a
barrel on the London-based ICE Futures Europe exchange. It's the lowest
close since March 2009. Futures are down more than 20 per cent from
their closing high on August 31, meeting the common definition of a bear
market. Total volume was 36 per cent above the 100-day average at
2.56pm in New York.
West Texas Intermediate crude
for January delivery dropped $US1.91, or 4.6 per cent, to settle at
$US39.94 a barrel on the New York Mercantile Exchange. It's the lowest
close since August 26. The US benchmark crude closed at a $US2.55
discount to Brent.
Saudi Arabian Oil Co lowered its
official selling price for all grades to the US, according to an
e-mailed statement from the company Wednesday. In Asia, the discount for
its Arab Light against a regional benchmark will be $US1.40 a barrel,
compared with $US1.30 in December.
OPEC's 12
members have pumped more than their collective production target of 30
million barrels a day the past 18 months, data compiled by Bloomberg
show. Venezuela will propose a 5 per cent production cut at this week's
meeting, state newspaper Correo Del Orinoco reported, citing President Nicolas Maduro.
"The
reaction to the Iranian headlines shows how nervous the oil market is,"
Tim Evans, an energy analyst at Citi Futures Perspective in New York,
said by phone. "This confirms that there's a divide in OPEC. The
majority of members are in favour of a cut, but the members in the
strongest position to make a cut aren't a part of that group."
Iran
plans to raise output by 500,000 barrels a day within a week of Western
sanctions being removed, and by 1 million barrels within six months.
US
crude supplies increased 1.18 million barrels in the week ended
November 27, Energy Information Administration data show. The gain left
nationwide stockpiles more than 120 million barrels above the five-year
seasonal average.
Total US stockpiles of crude and
fuel, including the Strategic Petroleum Reserve, rose 0.1 per cent to a
record 2 billion barrels.
"This is
a very bearish report," Kyle Cooper, director of research with IAF
Advisors and Cypress Energy Capital Management in Houston, said by
phone. "Overall stocks grew to a record 2 billion barrels. The
year-on-year and five-year-supply surpluses both grew, and refineries
are operating at the highest rate since late August. It's not a pretty
picture."
Refineries bolstered operating rates 2.5
per centage point to 94.5 per cent of capacity, the most since August.
This is the seventh-straight gain, capping the longest string of
increases since 2010.
Demand for gasoline climbed 4 per cent to 9.28 million barrels a day, EIA data show.
"Gasoline demand is the only silver lining in this report, because everything else simply sucks," Cooper said.
January
gasoline futures dropped 6.99 cents, or 5.1 per cent, to close at
$US1.2931 a gallon in New York. Diesel for January delivery fell 6.41
cents, or 4.7 per cent, to $US1.3049, the lowest settlement since March
2009.
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