LONDON--Crude-oil futures were down again Friday as there are
still few signs that producers are going to cut back even as global
growth is proving to be weaker than many had expected.
Global oil prices have been falling on a combination of factors
including high U.S. oil production, a surge in Libyan oil output, a
seasonal peak in refinery maintenance and weak demand from Asia and
Europe.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in November traded at $84.56 a barrel early in the
European day, down $1.21 in the Globex electronic session. November
Brent crude on London's ICE Futures exchange fell $0.88 to $89.17 a
barrel.
Friday, the Organization of the Petroleum Exporting Countries,
which represents some of the world's largest oil producers,
reported that the average oil price of its members has fallen to
the lowest level since December 2010, just before a string of Arab
uprisings pushed oil prices above $100 a barrel. The news
underscores the pain faced by OPEC members, most of whom need
higher prices to balance their budgets.
The organization said the average price of its members' crudes
basket stood at $88.27 a barrel, compared with $88.32 the previous
day. Those levels hadn't been touched since Dec. 13, 2010. OPEC's
basket price has now fallen lower than the Brent international
benchmark, though the latter also fell below $90 a barrel Thursday,
the first time that has happened since 2012.
Later Friday, OPEC will publish its monthly production report,
and investors will be watching to see whether there is any sign
that OPEC members are cutting back production to prop up
prices.
"In all probability no significant production cut is expected,"
said Tamas Varga of crude oil broker PVM. "The lack of a
significant cut will be another nail in the bulls' coffin."
Meanwhile, some technical factors are also coming into play.
For Brent crude a large quantity of put options were in the
market at the $90 mark, amounting to around 50 million barrels of
oil equivalent in terms of contracts, which is a very large
position, Mark Keenan, Singapore-based commodities strategist at
Société Générale GLE.FR -0.90% said. A put option allows investors
to sell an asset when a specific price level is reached.
As prices breached key levels, the volatility and weakness in
prices has been amplified, he said. Previous price support levels
were seen at the $100 a barrel mark, then at $95 and last at $90 a
barrel, Mr. Keenan added. These levels are also called
psychological price markers as investors tend to buy or sell in
large numbers when these markers are crossed.
A recent surge in the U.S. dollar, which pressured commodities
markets across the board, have also weighed on oil prices.
Mr. Keenan said if lower oil prices force marginal shale oil
producers in the U.S. to lose money, it would also help establish a
price floor.
"Generally speaking we do see prices recovering towards the end
of the year as the Atlantic basin glut dissipates and seasonal
winter demand starts to increase," he said.
"We have revised downwards our Brent and WTI price forecasts for
the fourth quarter and for 2015," Barclays analyst Michael Cohen
said in a report.
The bank now expects Brent to average $93 a barrel in the fourth
quarter and $96 a barrel in 2015, down from $106 a barrel and $107
a barrel, respectively.
ICE gas oil for October was down $1.22, at $754.00 a metric ton.
Gasoline was down 345 points at $2.2402 a gallon.
Benoît Faucon contributed to this article
Write to Matthew Cowley at matthew.cowley@wsj.com and Eric Yep
at eric.yep@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires