Oil fell, capping a fifth weekly loss on concern that OPEC’s refusal to cut production would worsen a global supply glut.
Brent and West Texas Intermediate extended their annual declines of more than 40 percent, the biggest since 2008, as OPEC resisted supply cuts to defend market share while the highest US production in three decades exacerbated a global glut. Trading volume headed for the lowest this year.
“The market is still reeling from oversupply,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s really hard to muster a substantial rally until we figure out how we are going to use all this oil.”
Brent for February settlement slipped US$0.79, or 1.3 percent, to US$59.45 a barrel on the London-based ICE Futures Europe exchange, down 3.1 percent this week. The volume of all futures was 84 percent below the 100-day average as of 3:10pm, with much of Europe on holiday after Christmas.
West Texas Intermediate crude for February delivery fell US$1.11, or 2 percent, to US$54.73 on the New York Mercantile Exchange, with volume 68 percent below average. Prices were down 3.2 percent this week. Trading reached 174,562 contracts at 2:49pm. The previous lowest volume this year was 244,240 on Aug. 25. Brent traded at a premium of US$4.72 to WTI on the ICE.
Both grades gained more than 1 percent earlier on fighting in Libya and on a report that Saudi Arabia expects prices to rise. The state-run National Oil Corp said yesterday that several tanks were on fire at the Es Sider terminal as militants attacked Libya’s largest petroleum port.
Saudi Arabia, OPEC’s biggest producer, is assuming an oil price of US$80 a barrel for next year, said John Sfakianakis, a former economic adviser to the country’s government.
We are still in a state of oversupply,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The disruption in Libya may contribute to Brent’s stabilization in the near term.”
Meanwhile, gold advanced the most in more than two weeks amid speculation that China, the world’s biggest consumer, would take more measures to bolster the economy, boosting demand for the precious metal as a store of value.
The People’s Bank of China plans to temporarily waive a requirement for lenders to set aside reserves for some deposits, people with knowledge of the matter said.
Gold surged 70 percent from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale. Gold has rebounded almost 6 percent from a four-year low reached last month as China lowered interest rates to spur economic growth and Japan expanded its unprecedented stimulus program.
The moves rekindled concern that global inflation could rise even as US consumer costs stay below the US Federal Reserve’s goal.
“Speculation that China will do more to support the economy is creating demand for gold,” George Gero, a precious-metal strategist at RBC Capital Markets in New York, said in a telephone interview. “At some point with all this money in the system, we could see some concern about inflation.”
Gold futures for February delivery climbed 1.9 percent to settle at US$1,195.30 an ounce at 1:40pm on the Comex in New York, the biggest gain for a most-active contract since Dec. 9.
Prices declined 1.9 percent in the previous three sessions. Aggregate trading was 55 percent below the 100-day average for this time, according to data compiled by Bloomberg.
Bullion has declined 0.6 percent this year as prospects for higher US borrowing costs, accelerating economic growth and a plunge in crude-oil prices crimped investor demand for the metal.
The metal slumped 28 percent last year as equities surged amid muted inflation.
Silver futures for March delivery rose 2.8 percent to US$16.147 an ounce. The price has declined 17 percent this year.
On the New York Mercantile Exchange, platinum futures for April delivery jumped 2.3 percent to US$1,219.90 an ounce, the biggest gain since Dec. 1. Palladium futures for March delivery advanced 1.3 percent to US$818.60 an ounce.
This year, platinum has slipped 11 percent, while palladium has gained 14 percent.
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