(Bloomberg) — Oil is poised for the longest weekly losing streak since August as investors focus on Saudi Arabia’s pledge to ramp up production at a time of growing economic uncertainty following a global equity rout.
Futures in New York slipped as much as 1.2 percent, on course for a third weekly drop of over 3 percent. While OPEC signaled it could cut output in 2019, prices are being weighed down by signals from the Saudi energy minister that the group and its allies are pumping as much as they can to offset any shortfalls. Also this week, commodities were hit by a U.S. stock sell-off as risk aversion spread through financial markets.
Crude has slumped about 10 percent over the past three weeks to trade below $67 a barrel. Doubts still remain over whether OPEC will be able to replace supply losses from Iran as U.S. sanctions are set to curb oil exports from the Persian Gulf state. Meanwhile, the Saudis face mounting pressure to provide a credible explanation for the death of journalist Jamal Khashoggi, which has added to concerns over the kingdom’s relations with the U.S.
“It became even more crucial for the Saudis to boost supply to meet U.S. demand for lower oil prices because without America’s support, it’ll be hard for the kingdom to avoid international outcry,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone. “Next week will be a very important week for oil markets as we approach the start of U.S. sanctions on Iran as well as America’s mid-term elections.”
West Texas Intermediate for December delivery fell as much as 81 cents to $66.52 a barrel on the New York Mercantile Exchange, and was at $66.70 at 7:45 a.m. in London. The contract gained 51 cents to $67.33 on Thursday. Total volume traded was about 3 percent above the 100-day average.
Brent for December settlement was 53 cents lower at $76.36 a barrel on the London-based ICE Futures Europe exchange. The contract rose 72 cents to $76.89 on Thursday. Prices are down 4.3 percent for the week. The global benchmark crude traded at a $9.66 premium to WTI for the same month.
A committee of crude producers including Russia and Saudi Arabia highlighted on Thursday the need to prepare “options” for how much oil they should pump next year to prevent the market slipping back into imbalance. The group said the rise in inventories in recent weeks coupled with fears about an economic slowdown “may require changing course.” That’s in contrast to a pledge made just days ago by Saudi Minister Khalid Al-Falih to pump flat out.
In the U.S., Donald Trump’s administration has appeared to be stepping back from giving Saudi Crown Prince Mohammed bin Salman full support as pressure increases to act against its Arab ally over what happened to Khashoggi. America has long been the kingdom’s most important partner and the President has made it the centerpiece of his efforts to isolate Iran.
In equity markets, the S&P 500 Index is set for the worst monthly decline since 2011 on concerns over global economic growth and sluggish corporate earnings. The MSCI Asia Pacific Index also dropped the most this week in more than eight months, heading for a third straight monthly loss. Meanwhile, gold — a safe haven — surged to near a three-month high this week.
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