Crude oil futures tumbled again on Friday morning in European trading, as weak equity markets, signals of higher Russian output and hints of a change of course at OPEC weighed on an already volatile week for oil.
At 1100 GMT, the December ICE Brent crude future contract was down 96 cents from Thursday’s settle, to $75.95/b, while the NYMEX November light sweet crude contract was down 98 cents to $66.35/b.
On Friday morning, the market was awaiting the latest twist in a week of turnarounds and output pledges from some of the world’s largest producers, as well as the next signal from volatile equity markets, which have also pulled commodities markets downwards as investors cut back on risk. Equities markets were dropping again on Friday morning in Europe, with the FTSE 100 down 1.50% on the day.
“It is quite clear there are uncertainties and jitters from equities [markets] that have spilled over to crude,” said George Wilkes, an analyst at Sucden in London.
On Thursday, Russian crude producer Rosneft said it would be able to offer additional crude to the market by the end of the year, alongside further capacity increases next year, according to the company’s CEO. The company increased its output to 4.444 million b/d in September, up 183,000 b/d from May. The company was responsible for the lion’s share of Russia’s pledge to cut output under the 2016 OPEC agreement.
On Thursday, the International Energy Agency said Russia could maintain oil output above 10 million b/d, despite the risk of sanctions, into the 2030s, a sharp revision upward from previous expectations.
The signs of higher Russian output come just days after Saudi Arabia pledged to increase output to 11 million b/d, suddenly flipping expectations that the arrival of US sanctions on Iran next month would sharply tighten global oil markets.
Comments by Saudi oil-minister Khalid al-Falih also suggest that the kingdom would aim for a level of $80/barrel, Commerzbank analy/sts said in a morning note.
“This makes the oil price a political issue once again, and as such can hardly be explained by fundamental developments alone,” said Commerzbank. “More pronounced price reactions to the daily news and increased volatility are therefore probable.”
Comments from OPEC have also stoked bearish sentiment this week, after the Joint Ministerial Monitoring Committee said Thursday that is was studying the outlook into 2019 to “prevent the re-emergence of a market imbalance,” and noted concerns about rising stocks and macroeconomic uncertainty that may “require changing course.”
Later in the day, Baker Hughes data with this week’s rig count in the US will be released, providing another signal on the scale of US output, after a week in which stocks numbers have outstripped analyst expectations. Data from S&P Global Platts shows that US rig counts are expected to have climbed by two this week, after two previous weeks of declines. Platts.com
