Oil collapses to six-week low amid supply concerns

NEW YORK, Nov. 17 (Reuters) – Oil prices collapsed on Wednesday, pushing major benchmarks to their lowest settlement levels since early October, after OPEC and the International Energy Agency have warned of an impending oversupply, while the increase in COVID-19 cases in Europe has increased downside risks to require recovery.

Prices fell further after trade closed after Reuters reported that the United States was asking other major global oil consumers like China and Japan to consider a coordinated release of oil reserves to bring down oil prices. price.

Brent crude futures fell $ 1.36, or 1.7%, to $ 81.05 a barrel at 12:18 p.m. EST (5:18 p.m. GMT). US West Texas Intermediate (WTI) crude futures were down $ 78.36, down $ 2.40, down 3%.

The declines took Brent to its lowest level since October 1 and US crude to its lowest level since October 7. Traders said funds apparently weighed a greater likelihood of supply starting to exceed demand, with a sharp decline from short-term futures to funds closing long positions.

“This signals a move towards balance that we haven’t seen for many months,” said Tony Headrick, energy analyst at CHS Hedging.

In post-close trading, US crude fell to $ 77.98 a barrel.

The global oil market has focused on rapidly rising demand in the face of a slow increase in supply from the Organization of the Petroleum Exporting Countries and its allies, as well as reluctance from major US players in the shale to spend too much on drilling. Read more

However, the IEA and OPEC have said in recent weeks that more offers may arrive in the coming months. OPEC and its allies, known as OPEC +, have maintained an agreement to increase production by 400,000 bpd each month so as not to overwhelm the market with supply.

OPEC Secretary General Mohammad Barkindo on Tuesday said the group sees signs of an oil supply oversupply from next month, adding that its members and allies will need to be “very, very careful” . Read more

Other countries, including the United States, have called on OPEC + to increase production faster. The United States has considered announcing an emergency release of crude from its Strategic Oil Reserve, which contains more than 600 million barrels of oil.

In the past two weeks, the US Department of Energy has sold more than 6 million barrels of oil – a portion of previously approved sales.

The United States currently has the discretion to sell multi-million barrels of SPR thanks to previous congressional approval. JP Morgan analysts said the White House could speed up those sales rather than declare an emergency – calling it “the simplest of options the White House has” to fight rising fuel prices.

The IEA has previously said U.S. supply is expected to increase at a faster rate in the second quarter of 2022, and the number of U.S. platforms has increased as private operators seek to profit from rising crude prices. The IEA expects U.S. production to account for around 60% of its forecast of 1.9 million barrels per day (bpd) for non-OPEC supply growth in 2022.

U.S. crude oil inventories fell 2.1 million barrels last week, according to government data, going against analysts’ expectations for a construction of 1.4 million barrels. Headrick noted, however, that the modest increase in inventory at the key hub in Cushing, Oklahoma, by 213,000 barrels, indicated that the end of drawdowns may be near.

New waves of COVID-19 cases in Europe have prompted some governments to reimpose restrictions; Austria has ordered a lockdown of unvaccinated people.

The Biden administration has asked the Federal Trade Commission to investigate the growing gap between the cost of unfinished gas and what consumers pay at the pump. Read more

Additional reporting by Ahmad Ghaddar in London, Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Marguerita Choy, Kirsten Donovan and David Gregorio

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