NEW YORK (DTN) -- New York Mercantile Exchange crude oil and ULSD futures settled lower Friday afternoon after a gloomy outlook on the global supply glut accelerated selling ahead of the weekend break. RBOB eked out a fractional gain following reports of refinery outages in Indiana and tightening supplies.
RBOB was the strongest segment of the oil complex, edging higher on the session while posting less than a 1.0% weekly gain after BP’s Whiting, Indiana, refinery shut its reformer Thursday, promoting short covering in the Chicago market.
The spot-month West Texas Intermediate crude contract saw the biggest weekly loss since March, while ICE Brent futures sank to a seven-year low after the International Energy Agency warned the freewheeling production policy by the Organization of Petroleum Exporting Countries will extended global supply glut through the end of 2016.
IEA said the decision by OPEC to scrap its official oil production ceiling at their Dec. 4 meeting was a de facto acknowledgment of current oil market reality. OPEC has effectively been pumping at will since Saudi Arabia convinced fellow members a year ago to refrain from supply cuts and defend market share against a relentless rise in non-OPEC supply, said the Paris-based agency.
IEA said the de facto acknowledgment last week "appears to signal a renewed determination to maximize low-cost OPEC supply and drive out high-cost non-OPEC production regardless of price," and there is evidence the strategy is starting to work.
The bearish supply outlook by IEA dominated the oil market and overshadowed positive weekly U.S. oil rigs report and data showing inflation picked up in November. The total rig count in the United States dropped 28 to 709 during the week-ended today, Baker Hughes reported, with rigs in operation down 1,184 from a year ago. There were 524 rigs drilling for oil, down 21 on the week and 1,022 lower than a year ago. That rig data was overshadowed by the IEA report.
NYMEX January WTI settled down $1.14 at $35.62 barrel, off a fresh 6-1/2-year low at $35.35 while losing $4.35 or 10.9% for the week. The ICE January Brent contract fell by 38 cents to $39.73 bbl at settlement, off a seven-year low at $37.36 and down $3.27 or 7.6% this week.
The NYMEX January ULSD futures contract plunged 7.95 cents to $1.1456 gallon at settlement, near a 6-1/2-year $1.1435 spot low and down 19.68 cents or 14.7% for the week. January RBOB futures settled 0.13 cents lower at a $1.2815 gallon settlement, reversing lower after posting a one-week high at $1.3012.
Plummeting oil prices had helped push major equity indices lower with energy shares down nearly 3%.
The market traded in choppy swings overnight then rambled lower after IEA said OPEC was keeping the market oversupplied.
The IEA report said OPEC output has averaged 31.7 million barrels per day since June, with Saudi Arabia and Iraq producing at or near record rates.
Saudi Arabia has produced above 10.0 million bpd since March to satisfy domestic and global supply requirements, and Iraq has held production above 4.0 million bpd first breached in June.
The agency said global oil demand growth likely peaked in the third quarter at 2.2 million bpd, and expects demand growth to "slow to a still-healthy" 1.2 million bpd in 2016, "as support from sharply falling oil prices begins to fade."
George Orwel can be reached at firstname.lastname@example.org
© Copyright 2015 DTN/The Progressive Farmer. All rights reserved.