West Texas Intermediate crude fell below $95 (NYMEX:CLZ13) a barrel for the first time since June on surging U.S. stockpiles and as the dollar gained versus the euro, curbing commodity demand from investors.
Futures capped a fourth straight weekly decline, the longest stretch of decreases in more than a year. A U.S. government report on Oct. 30 showed that supplies advanced a sixth week. The dollar climbed against the euro for a fifth day on speculation that the European Central Bank will reduce interest rates to spur economic growth.
“The supply side has overtaken everything else,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “There’s plenty of oil around and the market is in breakdown mode. We’re also down because the dollar is up against the euro on expectations the ECB will cut interest rates, which is extremely bearish for the market.”
WTI for December delivery dropped $1.77, or 1.8% to $94.61 a barrel on the New York Mercantile Exchange. It was the lowest settlement since June 21. Prices slipped 3.3% this week and fell 5.8% in October. The volume of all futures traded was 4.3% below the 100-day average at 3:31 p.m.
Brent for December settlement decreased $2.93, or 2.7%, to end the session at $105.91 a barrel on the London- based ICE Futures Europe exchange. It was the lowest closing price since July 4. Volume was 29% above the 100-day average. The European benchmark crude traded at an $11.30 premium to WTI, down from $12.46 at yesterday’s close.
“Both WTI and Brent are moving together now, ending what had been a tug-of-war between falling WTI and steady Brent,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The euro has weakened and the dollar is stronger, which is putting pressure on commodities in general.”
U.S. crude inventories climbed by 4.09 million barrels to 383.9 million last week, the most since June, data from the Energy Information Administration showed. Stockpiles at Cushing, Oklahoma, where WTI is delivered, advanced 2.18 million barrels to 35.5 million, a two-month high, according to the EIA, the Energy Department’s statistical arm.
Crude production declined 43,000 barrels a day to 7.85 million last week. Output had surged to the most since 1989 as the combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale formations in the central U.S.
WTI will probably extend losses next week, according to a Bloomberg survey. Twenty of 29 analysts and traders, or 69%, predicted WTI futures will decrease through Nov. 8. Seven respondents, or 24%, said there will be an advance and two projected little change.
The dollar increased as much as 0.8% to $1.348 against the euro, curbing demand for raw materials denominated in the U.S. currency. The S&P’s GSCI Index of 24 raw materials declined 1.7% to 611.64 at 3:31 p.m.
The ECB may cut rates next week after data yesterday showed the region’s inflation fell to the least since November 2009, according to Bank of America Corp., UBS AG and Royal Bank of Scotland Group Plc.
“The falling euro is breaking the backs of demand for commodities,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The deflationary environment will lead to a weaker euro, which is bearish for this market.”
The dollar rallied further after a report that U.S. manufacturing grew in October at a faster pace than forecast. The Institute for Supply Management’s index climbed to 56.4, the highest level since April 2011, from 56.2 a month earlier, according to a report today from the Tempe, Arizona-based group. The median forecast in a Bloomberg survey of economists was 55.
OPEC’s crude output rose in October after the completion of maintenance work in Iraq, a Bloomberg survey showed yesterday. The 12-member Organization of Petroleum Exporting Countries boosted daily production by 38,000 barrels a day to an average of 30.621 million, according to the survey of oil companies, producers and analysts.
Iraq exported 2.25 million barrels a day of crude in October, up 8.8% from the prior month, Asim Jihad, an oil ministry spokesman, said by phone today from Baghdad.
Libya is producing 350,000 to 400,000 barrels a day, Ibrahim Al Awami, the oil ministry’s head of measurement and inspection, said by phone yesterday, or about 100,000 barrels a day more than earlier this week.
“Oil is under a lot of pressure because oil supplies are trending sharply higher here and there may be some anticipation that the trend will continue,” Evans said. “Libyan production is increasing and there was an improvement in Iraqi exports in October that suggests maintenance is ending.”
Implied volatility for at-the-money WTI options expiring in December was 20.1%, up from 19.1% yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 526,981 contracts as of 3:32 p.m. It totaled 570,357 contracts yesterday, 1.9% below the three-month average. Open interest was 1.76 million contracts.