Crude falls amid further demand weakness

West Texas Intermediate (NYMEX:CLF15) and Brent (NYMEX:SCF15) crudes dropped after Japan, the world’s third-largest oil consuming country, unexpectedly slipped into a recession.

Futures fell as much as 1.5% in New York and 1.9% in London. Japan’s economy shrank an annualized 1.6% in the third quarter, a second successive drop. Iran’s oil minister is preparing to visit the United Arab Emirates this week, according to Shana, the Tehran-based ministry’s news service. The Organization of Petroleum Exporting Countries is scheduled to meet Nov. 27.

Brent has declined about 32% from a June peak as leading OPEC members resisted calls to cut output and instead reduced some export prices while U.S. production climbed to the highest level in more than three decades. Venezuela, Libya and Ecuador have asked for action to support crude as the 12-member group prepares to meet in Vienna.

“The new Japanese data certainly doesn’t help the demand perception,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “OPEC will remain in the foreground, putting downward pressure on the market for the foreseeable future, until we get definitive word that they are going to cut output.”

WTI for December delivery decreased 82 cents, or 1.1%, to $75 a barrel at 9:05 a.m. on the New York Mercantile Exchange. Futures touched $73.25 Nov. 14, the lowest intraday price since Sept. 21, 2010. The volume of all futures traded was about 48% above the 100-day average for the time of day.

Eighth Week
Brent for January settlement slipped $1.18, or 1.5%, to $78.23 a barrel on the London-based ICE Futures Europe exchange. Volume was 39% lower than the 100-day average. The European benchmark traded at a $3.36 premium to WTI for the same month.

Front-month Brent futures slid an eighth week through Nov. 14, the longest run of declines since the contract began trading in 1988.

The Japanese economy, the world’s third largest, was projected to post a 2.2% gain in the last quarter, according to a Bloomberg survey.

Iran’s OPEC Governor Hossein Kazempour, national representative Mehdi Asali and the country’s head of the oil contracts committee Mehdi Hosseini will accompany minister Bijan Namdar Zanganeh to the U.A.E., Iran’s oil ministry said.

‘Background Noise’
Iraqi President Fouad Masoum and Libyan Prime Minister Abdullah al-Thani flew to Riyadh last week for separate talks with Saudi officials. Rafael Ramirez, Venezuela’s foreign minister and representative to OPEC, held talks in Algeria and Qatar, while Saudi Arabia’s Ali Al-Naimi toured Latin America.

“I don’t care who’s jetting where, it is just background noise,” Yawger said. “Until we hear from the Saudis, prices will remain under pressure. If they can’t come to an agreement or decide to do nothing in Vienna there will be further downward pressure after the meeting.”

Saudi Arabia probably favors maintaining production, according to Barclays Plc. Al-Naimi’s comments on Nov. 12 that the kingdom’s oil policy hasn’t changed, along with “the tone on demand recovery” in OPEC’s monthly report, signals that doing so is a preferred option to cutting output, analysts including Miswin Mahesh in London said in a report today.

Speculators became more bullish on WTI for the first time in three weeks, judging that a slump in prices will force OPEC to act. The net-long position in the New York contract rose 8.7% in the week ended Nov. 11, U.S. Commodity Futures Trading Commission data show. Long holdings rebounded from the lowest level in 17 months while short bets contracted.

Hedge funds and other money managers raised bullish bets on Brent for a third week, increasing by 9,783 contracts in the week ended Nov. 11, ICE said today in its weekly Commitments of Traders report.

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