Oil headed for the biggest weekly decline since March amid speculation OPEC’s decision to effectively scrap production targets will keep the market oversupplied.
Futures dropped as much as 1 percent in New York and are down 8.4 percent this week. Prices are falling for a sixth day, the longest losing streak in almost nine months, since the Organization of Petroleum Exporting Countries chose not to curb output at its Dec. 4 meeting. Production rose to a three-year high in November, the group said in a report Thursday, as surging Iraqi volumes more than offset a pullback by Saudi Arabia.
Oil prices have slumped to levels last seen during the global financial crisis as OPEC’s strategy of defending market share against higher-cost producers fueled a record surplus estimated by the International Energy Agency at almost 3 billion barrels. ConocoPhillips will reduce capital spending by 25 percent next year to protect the highest dividend yield among major U.S. producers, the Houston-based company said Thursday.
“OPEC’s output in November indicates that the global supply glut is exacerbating,” Will Yun, a commodities analyst at Hyundai Futures Corp. in Seoul, said by phone. “It’s hard to find any bullish elements from the demand side. Oil may plunge to near $30 a barrel.”
West Texas Intermediate for January delivery declined as much as 36 cents to $36.40 a barrel on the New York Mercantile Exchange and was at $36.60 at 3:09 p.m. Singapore time. The contract decreased 40 cents to $36.76 on Thursday, the lowest close since February 2009. The volume of all futures traded was 21 percent below the 100-day average.
Brent for January settlement slid as much as 35 cents, or 0.9 percent, to $39.38 a barrel on the London-based ICE Futures Europe exchange. It has lost 7.9 percent this week. The European benchmark crude was at a premium of $3.01 to WTI.
OPEC said its output climbed by 230,100 barrels a day in November to 31.695 million, the highest level since April 2012. The group pumped about 900,000 barrels a day more than it anticipates will be needed in 2016. Non-OPEC supply will shrink by 380,000 barrels a day next year to average 57.14 million a day, with the U.S. accounting for about half of that contraction, it predicted.
ConocoPhillips’s plan to cut spending to $7.7 billion comes a day after Chevron Corp. disclosed a 2016 budget 24 percent smaller than this year’s. Together, the reductions by the two companies totaled $10.9 billion, enough to rent 10 deepwater drilling rigs every day for more than half a decade.
Seventeen of 30 analysts and traders, or 57 percent, were bearish on WTI in a Bloomberg survey Thursday. Five respondents were bullish while eight were neutral.