Oil swung between gains and losses near US$45 per barrel as investors weighed the outlook for a persistent global glut against signs US drillers are continuing to reduce active rigs.
Futures were little changed in New York after declining 2.8 percent on Friday as Goldman Sachs Group Inc said the surplus is bigger than it expected and prices could fall as low as US$20 per barrel.
The number of rigs seeking oil slid to the lowest level in almost two months, according to Baker Hughes Inc.
Oil is down more than 25 percent from its closing peak in June on speculation the global oversupply could be prolonged. While the International Energy Agency (IEA) predicts crude stockpiles might diminish in the second half of next year as supply outside OPEC declines, Iran has vowed to boost output and increase exports once sanctions are lifted.
“If things play out as the IEA predict, we will get production cuts outside OPEC and we appear to be seeing the early stages of that coming through in the US now,” CMC Markets chief analyst Ric Spooner said by phone from Sydney.
“If Iran does come back, the market will be left with a significant surplus,” he said.
West Texas Intermediate (WTI) for October delivery was at US$44.62 per barrel on the New York Mercantile Exchange, down US$0.01, at 7:50am yesterday London time. The contract slid 3.1 percent last week. The volume of all futures traded was about 20 percent below the 100-day average. Prices have decreased 16 percent this year.
Brent for October settlement, which expires today, was US$0.27 lower at US$47.87 per barrel on the London-based ICE Futures Europe exchange. It lost US$0.75, or 1.5 percent, to US$48.14 on Friday.
The more active November future slid US$0.20 to US$48.84.
While US$20 per barrel oil is not Goldman’s base-case scenario, a failure to reduce production fast enough might require prices near that level to clear the oversupply, the bank said in a report e-mailed on Friday, while trimming its Brent and WTI crude forecasts through next year. US shale is the likely near-term source of output cuts, Goldman said.
Drillers in the US idled rigs for a second week, reducing the number of active machines by 10 to 652, Baker Hughes said on Friday.
The nation’s output declined for a fifth week through Sept. 4 to average 9.14 million barrels a day, the Energy Information Administration said on Thursday.
The OPEC has pumped above its quota the past 15 months, fueling the global surplus.
Iraq, the second-biggest member of the group, produced 3.76 million barrels of oil per day last month, compared with 3.7 million a day in July, according to an e-mailed statement from the state oil marketing company known as SOMO.
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