Losing Streak, Oil Enters Bear Market

Oil’s set for its longest stretch of declines on record after entering a bear market, with investors awaiting a weekend meeting of OPEC and its allies to discuss output strategy.

Futures in New York were slipping for a 10th day, extending a dramatic plunge that’s dragged prices down over 20% from a 2014-high just five weeks ago, Bloomberg reported.

The slump has rattled producers, and the Organization of Petroleum Exporting Countries has signaled it may cut output next year -- an option that’ll be part of talks when the group meets with partners in Abu Dhabi on Sunday.

Oil’s slump has been exacerbated by a US decision to allow eight countries to continue importing from Iran even after it hits the OPEC member with sanctions.

That revived concerns of a supply glut, in contrast to earlier fears over a crude crunch due to shrinking exports from the Persian Gulf state. Pledges by other producers such as Saudi Arabia to pump more and record American supply as well as rising stockpiles also weighed on prices.

“Certainly, the waivers on US sanctions for Iranian crude have really accelerated the decline from last month and sensitivity to those issues have been high in recent times,” said Daniel Hynes, a Sydney-based senior strategist at Australia & New Zealand Banking Group Ltd.

Growing US supplies “add to rising concerns of output,” while “the meeting over the weekend between OPEC and Russia may set the tone for the next OPEC meeting in December.”

A potential decision to return to output cuts by OPEC would mark the second production U-turn this year for the group, some members of which are said to be concerned that inventories are rising.

For Saudi Arabia a reduction would mark the third time in recent years the kingdom has delivered a supply surge only to quickly reverse it.

In the US, crude production increased to 11.6 million barrels per day last week, the highest level on record, according to Energy Information Administration data.

At the same time, nationwide stockpiles rose 5.8 million barrels last week, compared to a 2-million-barrel gain expected in a Bloomberg survey.

source: Financial Tribune