Oil swung between gains and losses below $45 a barrel as investors weighed the outlook for a persistent global glut against signs US drillers are continuing to reduce active rigs.
Futures were little changed in New York after declining 2.8 per cent Friday as Goldman Sachs said the surplus is bigger than it expected and prices could fall as low as $20 a barrel. The number of rigs seeking oil slid to the lowest level in almost two months, according to Baker Hughes.
Oil is down more than 25 per cent from its closing peak in June on speculation the global oversupply will be prolonged. While the International Energy Agency predicts crude stockpiles will diminish in the second half of next year as supply outside Opec declines, Iran has vowed to boost output and increase exports once sanctions are lifted.
“If things play out as the IEA predict, we will get production cuts outside Opec and we appear to be seeing the early stages of that coming through in the US now,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said. “If Iran does come back, the market will be left with a significant surplus.”
West Texas Intermediate for October delivery was at $44.47 a barrel on the New York Mercantile Exchange, down 16 cents, at 2pm Sydney time. The contract slid 3.1 per cent last week. The volume of all futures traded was about 10 per cent below the 100-day average. Prices have decreased 17 per cent this year.
Brent for October settlement, which expires Tuesday, was 41 cents lower at $47.73 a barrel on the London-based ICE Futures Europe exchange. It lost 75 cents, or 1.5 per cent, to $48.14 on Friday. The more-active November future slid 28 cents to $48.76.
While $20 a barrel oil is not Goldman’s base-case scenario, a failure to reduce production fast enough may require prices near that level to clear the oversupply, the bank said in a report on Friday while trimming its Brent and WTI crude forecasts through 2016. US shale is the likely near-term source of output cuts, Goldman said.
Drillers in the US idled rigs for a second week, reducing the number of active machines by 10 to 652, Baker Hughes said Friday. The nation’s output declined for a fifth week through September 4 to average 9.14 million barrels a day, the Energy Information Administration said Thursday.
Opec has pumped above its quota during the past 15 months, fuelling the global surplus. Iraq, the second-biggest member of the group, produced 3.76 million barrels of oil a day in August, compared with 3.7 million a day in July, according to a statement from the state oil marketing company known as Somo.
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