Sep 2016 Financial News

Oil prices plunge 8% this week

Sep 02, 2016

As Finance Minister Colm Imbert and his team of technocrats get ready to make the energy price assumptions on which the 2017 budget will be based, they are digesting news that US oil prices fell by almost 3.5 per cent yesterday, heading for their sharpest weekly loss since January.

The decline in oil prices came as investors focused on a growing glut from US crude stockpiles, even as they brushed aside talk that OPEC might freeze production.

Energy monitoring service Genscape’s report of a 714,282-barrel drawdown at the Cushing, Oklahoma, delivery point for US crude futures during the week ended on August 30 did little to bolster sentiment, traders said.

Investors focused instead on Wednesday’s government data showing a 2.3 million-barrel build in US crude stocks in the last week, more than double what the market had expected. Inventories of distillates, which include diesel and heating oil, rose nearly 10 times as much as forecast, the data from the US Energy Information Administration showed.

“The high US inventory data suggest oversupply will remain for longer than expected,” said Hans van Cleef, senior energy economist at ABN AMRO Bank NV in Amsterdam.

“On top of that, anticipation of a higher dollar if the Fed starts to hike rates is negative for oil prices. And there’s also uncertainty about the likelihood of OPEC/non-OPEC action at the end of the month.”

Brent crude futures for November fell US$1.35, or 2.88 per cent, to US$45.52 a barrel.

US crude futures were down US$1.54, or 3.45 per cent, to US$43.16 a barrel, marking a three-week low. It’s the worst settle since August 11, with a close of US$43.49. Natural gas fell 10 cents to US$2.79 per 1,000 cubic feet.

Both Brent and WTI were down more than 8 per cent week-to-date for their biggest decline since mid-January.

Oil prices rose as much 11 per cent in August, posting their best monthly return since April, on speculation that the Organisation of the Petroleum Exporting Countries and other producers might agree on curbing output at September 26-28 talks in Algeria. Russia is also expected to attend the IEF. But many investors doubt OPEC will be able to agree a common position on production and prices have fallen in recent days. Many past efforts to restrict production have failed and OPEC is responsible for only around 40 per cent of world output.

“There is still lots of correction potential, given the overhang of speculative long positions and exaggerated hopes for an output freeze,” said Commerzbank oil analyst Carsten Fritsch.

Saudi Foreign Minister Adel al-Jubeir said yesterday that OPEC and non-OPEC oil producers were increasingly moving towards a common position.

“I think there is a move toward a common position, toward a common effort,” he told an event in Tokyo.

“If you want to have an impact then all of us have to shoulder the responsibility, and I believe over the past five or six months, I believe that there has been an increasing realization that this is a collective effort,” Al-Jubeir said.

But many analysts are skeptical.

“Talk is cheap,” Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told Reuters Global Oil Forum. “Reality will set in and the market will realize that the agendas of various OPEC producers are not aligned.”

Source:
Trinidad Guardian
Friday September 2, 2016

http://www.guardian.co.tt/business/2016-09-02/oil-prices-plunge-8-week