Oil prices down over $1/barrel
US oil prices fell over $1/barrel on Monday on increased US drilling and higher OPEC output after a rally that helped boost prices to their highest third-quarter gain in 13 years.
Benchmark Brent crude fell 74 cents to $56.05/barrel by 12:43 p.m. EDT and US WTI was down $1.19 to $53.48/barrel. Western Canadian Select was down by one penny to $40.66/barrel.
According to a survey by Reuters, Iraq’s crude exports rose slightly last month and OPEC boosted its overall output. As well, on Friday, Baker Hughes data showed the US oil rig count had grown by six, bringing the total to 750.
“We’ve seen them add rigs for the first time in seven weeks, so that changes sentiment as well,” John Tjornehoj, energy market analyst at CHS Hedging told Reuters.
The rally that closed out the third quarter was driven by signs that the three-year long supply glut was easing, thanks to the OPEC supply cut pact and increased global crude demand.
But the Reuters survey found higher OPEC output last month, mostly due to increased production in Iraq and Libya.
However, on Monday, Libya’s National Oil Company declared force majeure on deliveries from its largest oilfield, Sharara.
According to CNBC, Monday’s sharp drop in oil futures follows a trend where US crude does not typically perform well in the fourth quarter.
Over the past 25 years, WTI traded positive for 40 per cent of the time in Q4 and the average quarterly return was -7.5 per cent. 2016 was an exception when US crude rose by over 11 per cent in the fourth quarter as OPEC solidified plans for its supply cut agreement.
Analysts say the decline in crude prices during the fourth quarter are related to refinery maintenance and a drop in gasoline demand. As well, demand for diesel and heating oil do not increase until the end of the quarter as winter sets in.
“It’s just a bad calendar-weather setup for the complex,” John Kilduff, founding partner at energy hedge fund Again Capital told CNBC.
