Oil heads for worst week since march as OPEC seen fueling glut

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.”

OPEC Supply

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.

Spending Cuts

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.