Oil in New York traded near a five-year low as Russia reiterated that it will keep crude production steady next year, echoing the Organization of Petroleum Exporting Countries’ (Opec) strategy to refrain from curbing supply to tackle a global surplus.
Futures fell as much as 2.4 percent, after sliding below $54 a barrel on Tuesday for the first time since May 2009. Output from Russia, the world’s largest crude producer, will be similar to this year’s 10.6 million barrels a day, according to Energy Minister Alexander Novak. Iran is said to be offering shipments to Asia at the deepest discount in at least 14 years, taking a cue from Saudi Arabia in cutting price differentials.
Oil has slumped 43 percent this year, as a surge in shale drilling lifted US output to the fastest pace in three decades amid slowing world demand growth. Leading members of the Opec, such as Saudi Arabia, have resisted calls from smaller producers, including Venezuela and Ecuador, to reduce quotas, to stem the price drop. “Opec won’t make a move unless the US cuts its production first, and for now it looks like the game of chicken will most likely continue through next year,” Kang Yoo-jin, a commodities analyst at Woori Investment & Securities Co. in Seoul, said by phone. “As oil prices are slumping, it seems to be a strategic decision for producing countries, including Opec and Russia, to keep their output levels unchanged.”
West Texas Intermediate for January delivery declined as much as $1.32 to $54.61 a barrel in electronic trading on the New York Mercantile Exchange and was at $55.71 at 4:10 p.m. Singapore time. It gained 2 cents to $55.93 on Tuesday. Total volume traded was about 82 percent above the 100-day average. Prices are set for the biggest annual loss since 2008.
Russian economy
Brent for February settlement was 29 cents higher at $60.30 a barrel on the London-based ICE Futures Europe exchange. The January contract expired on Tuesday after decreasing 2 percent to $59.86. The European benchmark crude traded at a premium of $4.11 to WTI for the same month.
Brent’s 46-percent collapse this year is contributing to a currency crisis in Russia, which relies on energy exports for half its budget. Sanctions imposed by the US and European Union over the conflict in Ukraine also spurred Russia’s largest capital outflows in six years as its economy nears recession.
The price of oil “will stabilize itself,” Novak said at the Gas Exporting Countries Forum in Doha on Tuesday.