Market Close: Dec 22
Dec 22nd, 2014 by loren
Oil prices slumped again on Monday, as comments about maintaining production from several OPEC ministers sparked a renewed selloff.
Saudi Energy Minister Ali al-Naimi said the Persian Gulf nation will maintain its oil production and may even increase it if a new client emerges. The comment is the latest signal that the largest oil producer is unlikely to cut production in response to a massive drop in prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG5, -3.06% gave up earlier gains and settled $1.75, or 3%, lower at $55.38 a barrel. February Brent crude on London’s ICE Futures exchange LCOG5, -2.04% reversed earlier gains and was trading slightly above $60 a barrel.
The price of Nymex crude fell 2.2% last week, its fourth consecutive week of declines. During those four weeks, Nymex prices plunged 26.1% — the largest four-week drop in percentage terms since the week ended Dec. 26, 2008. Brent crude fell 1.2% last week and has also dropped for the last four consecutive weeks, losing 23.6% of its value.
On Sunday, Gulf oil officials defended the decision of the Organization of the Petroleum Exporting Countries last month to keep its production ceiling intact, blaming non-OPEC producers for the current oil market glut.
The Saudi oil minister blamed a lack of coordination among non-OPEC producers, along with speculators and misleading information, for the price slump. He was speaking at an energy conference in Abu Dhabi.
Oil prices have nose-dived since OPEC decided on Nov. 27 to keep its production ceiling unchanged.
“Oversupply is going to stay, as OPEC countries are intent in maintaining the production. I believe this is their watershed moment. Unless they continue to have their market share by eliminating the competition from the U.S. shale producers, their future survival is in question,” said Phil Flynn, senior market analyst at the PRICE Futures Group.
Commodity analysts at Barclays said in a note Monday that the slide in crude-oil prices probably isn’t over yet. “It would take a close above $64.25 [a barrel] this month to suggest seller capitulation,” they said in a note.
KBC Energy Economics also said it expected absolute energy prices to remain lower through the end of 2015.
Meanwhile, money managers continued to extend their net-long positions, betting that prices will rise. Money managers raised bullish bets on oil with a net-long position of 217,723 contracts through Dec. 16, up 13.8% from the week earlier, CFTC data showed.
Citi Futures said the strongest bullish argument for crude oil at the moment is that it looks cheap after a protracted price drop.