Commodity Update; Crude Oil – 06 October 2014
Crude falls on further increases to supply; market awaits OPEC action
A shaky outlook for the US economy throughout much of the earlier stages of last week helped to ferment a further decline in oil benchmarks on both sides of the Atlantic. Brent crude fell to a 2 ½ year low while WTI also fell to its lowest level for 12 months. This trend continued into the closing hours of the week despite the outcome of US payrolls and employment numbers on late Friday afternoon.
A key driver behind persistent downward leg in crude, in addition to economic data, were survey results reported by Bloomberg and Reuters. Here, both information vendors claimed that OPEC production during September was almost 1 million barrels per day (810k) higher than in the same period one year ago.
This rapidly increasing supply has largely been driven by a recovery in Libyan output although it was noted that all OPEC member states have increased their output within the period.
The higher levels of production from producer states contrasts against what now appears to have been over ambitious forecasts for global demand from industry bodies.
All in all, the outlook for those hoping to see a rally in crude prices remains bleak. With plenty of supply side data expected between now and the time of the next OPEC meeting at the end of November, scope exists for both WTI and Brent to continue to remain under pressure.
Brent / WTI (Black)
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