Sunday 06 / October / 2024
Hong Kong: Oil’s longest rally this year faltered on signs of industrial activity in the world’s biggest energy consumer is deteriorating and as Organisation of Petroleum Exporting Countries (Opec) pumped a record amount of crude.
Futures lost as much as 2.8 per cent in New York to snap a four-day advance. China’s purchasing managers index dropped in January to a three-year low, with the official factory gauge signaling contraction for a record sixth month.
Output from the Opec rose to 33.11 million barrels a day last month following Indonesia’s readmission to the group, data shows. The United States drillers idled rigs for a sixth week, Baker Hughes said.
“Data from China remains weak, especially in the light of strong liquidity ensured by the Chinese central bank,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “But as oil demand remains as strong as ever, it’s really irrational exuberance among investors that’s driving prices lower.”
While oil capped a second weekly advance on Friday on speculation that Opec and producers outside the group may cooperate to trim output, prices are down about 11 per cent this year amid volatility in global markets, brimming US stockpiles and the prospect of increased Iranian exports. Chevron last week posted its first quarterly loss since 2002, which may presage a wave of writedowns as other super-majors begin announcing results. Exxon Mobil and BP are set to report on Tuesday.
Opec output
West Texas Intermediate for March delivery dropped as much as 93 cents to $32.69 a barrel on the New York Mercantile Exchange and was at $33.03. The contract climbed 40 cents to $33.62 a barrel on Friday to cap a 4.4 per cent weekly increase. Total volume traded Monday was about double the 100-day average.
Brent for April settlement declined as much as $1.02, or 2.8 per cent, to $34.97 a barrel on the London-based ICE Futures Europe exchange. The March contract expired on Friday after advancing 85 cents to $34.74. The European benchmark crude was at a premium of $1 to WTI for April.
Opec’s January output includes 815,000 barrels from Indonesia, which contributed for the first time since its membership was restored on January 1 after a seven-year suspension, according to a survey. Nigeria’s production increased by 109,000 barrels a day to 2.028 million, the highest in a year, while Kuwait pumped an additional 100,000 barrels a day and Iran added 60,000 barrels a day.
Manufacturing PMI in China came in at 49.4, lower than a median estimate of 49.6 in a survey of economists, and represents the longest stretch on record of readings under 50, which indicates contraction. The nation is the world’s second- biggest oil user.
Rig count
Rigs targeting oil in the US fell by 12 to 498, the lowest since 2010, Baker Hughes said on its website on Friday. The Permian Basin in west Texas showed the steepest decline for the second straight week, with 16 machines shut down, leaving 179 working in the nation’s most active field.
Hedge funds increased bullish bets by the most since 2010, according to data from the US Commodity Futures Trading Commission. Speculators’ net-long position in WTI rose 35 per cent in the week ended January 26 to 110,432 contracts of futures and options.
Oil climbed last week after Interfax reported that Opec and Russia could discuss cooperation to address the global supply excess, citing January 28 comments from Russian Energy Minister Alexander Novak. Novak said that no such meeting was planned with Opec members.
It’s “highly unlikely” that a joint production cut will be agreed, analysts Jeff Currie and Damien Courvalin at Goldman Sachs said in a report, as the strategy of Opec leader Saudi Arabia to maximize its revenues by squeezing out rivals is finally showing signs of success.
