Longest oil slump in four years signals growing worldwide surplus

Oil notched its longest losing streak in four years as expanding U.S. stockpiles overshadowed supply concerns from the Persian Gulf to Latin America.

Futures fell as much as 1.4 per cent in New York on Thursday, extending the decline to a ninth day. The last time crude registered such a downtrend was mid 2014. American oil inventories grew at more than twice the anticipated pace last week, a government report showed on Wednesday. That supply overhang trumped indications OPEC may discuss production cuts as soon as this weekend.

Crude has tumbled 20 per cent since its four-year high last month as worries over sanctions targeting Iranian oil exports evaporated, in part because of exemptions to some of the Islamic Republic’s clients. U.S. President Donald Trump said the waivers were meant to soften the blow to global crude markets.

“Most of this selling pressure is related to the removal of fears concerning tight supplies from the drop in Iranian exports and the granting of those temporary waivers,” said Gene McGillian, a senior analyst at Tradition Energy.

Consultant FGE estimated the waivers granted to China, India and six other nations will allow Iran to continue shipping 1.2 million to 1.7 million barrels a day, more than previously expected.

“OPEC and Russia may use cuts to support prices at US$70 a barrel,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank in Copenhagen. “But the U.S. sanctions waivers could prevent prices from breaking above US$80.”

West Texas Intermediate crude for December delivery declined 47 cents to US$61.20 a barrel at 10:54 a.m. on the New York Mercantile Exchange. Total volume traded was about 45 per cent above the 100-day average. Brent futures for January settlement slipped 44 cents to US$71.63 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$10.23 premium to WTI for the same month.

At a gathering this weekend in Abu Dhabi, OPEC and allied producers will discuss scenarios including a second production Uturn that would curb output next year, according to delegates.

U.S. pressure to lower prices likely will decrease with the midterm elections over, Hansen said.