Oil prices plunged the most in a month as key market indicators pointed to weakness and OPEC said global crude supply was outpacing demand faster than anticipated.
West Texas Intermediate crude fell more than 3%, erasing three sessions of gains. The US benchmark's near-term futures briefly traded in a so-called bearish contango structure—meaning oil prices are currently cheaper than contracts for delivery further out—for the first time since February, a new sign of a long-anticipated oversupply.
OPEC revised its estimate for the global oil market to a surplus in the third quarter from a deficit as US production exceeded expectations and the group itself accelerated production. Global oil supply exceeded demand by 500,000 barrels per day during the period, the group said.
On Wednesday, the US Energy Information Administration (EIA) is scheduled to release its monthly outlook, followed by the International Energy Agency (IEA) assessment a day later.
Trend-following funds also sold positions, reinforcing long-term pressure on oil. "The whipsaw season is still ongoing, but we expect CTAs to soon sell about 25% of their maximum size in WTI crude and 10% in Brent, in response to weakening trend signals," said Dan Ghali, commodity strategist at TD Securities. A drop below $58.50 a barrel in the benchmark US December contract could trigger further selling, he added.
Oil has weakened this year on concerns about oversupply, with the Organization of the Petroleum Exporting Countries (OPEC) and its allies restoring capacity, and drillers outside the group increasing production. The Paris-based IEA forecasts a record surplus next year, and banks including Goldman Sachs Group Inc. have warned of rising inventories. However, premiums for refined fuels such as gasoline and diesel have surged, in part due to a series of refinery outages, traders said, including attacks on Russian plants.
WTI for December delivery fell 3.3% to $59.00 a barrel at 10:39 a.m. in New York. Brent for January delivery fell 3.0% to $63.20 per barrel. (alg)
Source: Bloomberg
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