Oil prices slide in December amid bearish comments from Russia and OPEC leaders. Prices also dropped after reports that a Nigerian dockworker strike was lifted, raising the possibility of an unexpected increase in U.S. crude supplies already, according to Wall Street Journal
The decline arrested two straight sessions of gains for oil prices and brought the benchmark contracts to new five-year lows, as analysts said there was little reason for the market to stabilize given limited change to the bearish supply-demand picture that has cut prices nearly in half since June. The market rallied early Thursday in reaction to part of the comments made by Saudi Arabia’s oil minister but gave back those gains as it became clear that he and others maintained the same dour outlook.
The oil slide deepened within the last hour of trading, repeating a volatile pattern of recent sessions in which early gains have been whittled away over the course of the day. The benchmark U.S. oil futures contract ended down $2.36, or 4.2%, at $54.11 a barrel on the New York Mercantile Exchange. The global Brent crude contract ended down $1.91, or 3.1%, at $59.27 a barrel. Both contracts ended at the lowest price since May 2009.
Thursday’s early rally as oil prices slide was kicked off after Saudi Arabia’s oil minister, Ali al-Naimi, characterized the recent price rout as “temporary” in published comments and said crude demand would recover as the global economy improves. “These rallies are just bounces, but we’re still in a downtrend and we’re really not getting any encouraging news from anywhere,” said Andrew Lebow, a broker at investment bank Jefferies.
But he went on to say that the Organization of the Petroleum Exporting Countries would maintain output levels in a bid to retain its market share, prompting oil traders to cash out of the early gains in both contracts.
The energy minister of the United Arab Emirates also defended OPEC’s inaction, saying the cartel wasn’t responsible for the growing surplus of oil on world markets. The comment was interpreted by analysts as a shot at the U.S., which is producing more than 9.4 million barrels of oil a day and exporting more than a third of that in the form of refined products such as gasoline and diesel.
And in a news conference, Russian President Vladimir Putin said the country’s economy will restructure itself to handle low oil prices that could last as long as two years in a worst-case scenario, even if prices fell as low as $40 a barrel.
Meanwhile, dockworkers in Nigeria suspended a strike and allowed port activities to resume. Analysts said the market took that as a signal of renewed oil exports there. Nigeria is the largest oil producer in Africa, exporting 2.2 million barrels a day.
Indeed, several analysts said the bearish fundamental conditions of massive production and shrinking demand remain in place and are expected to continue in the first half of 2015.
“We continue to see further downside risk for Brent as the oversupply in the global market continues to grow,” said Macquarie Bank strategist Vikas Dwivedi in a note to clients.
Global energy companies have scrambled to adjust in the face of an uncertain outlook. Chevron Corp. became the latest big name to scale back, telling Canadian regulators Wednesday that it has “indefinitely” suspended plans to drill for oil in the Arctic. Other companies, including Marathon Oil, Husky Energy and Penn West Petroleum, have pared their capital-spending plans in recent days.
While oil prices slide, gasoline and diesel futures also ended at new lows. January diesel was down 6.98 cents, or 3.5%, at $1.9387 a gallon, the lowest closing price since August 2010 on the Nymex. Gasoline for January delivery ended down 3.9 cents, or 2.5%, at $1.5272 a gallon, the lowest since May 2009. U.S. drivers are seeing the effects of lower gasoline prices at the pump. AAA said average U.S. retail gasoline prices on Thursday fell below $2.50 a gallon for the first time in more than five years, to $2.48 a gallon.