Oil Drops to Below $90 Per Barrel

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Oil Drops to Below $90 per Barrel

US oil prices slid to below $90 per barrel on Thursday for the first time in 17 months as oil producers did not show signs of reducing production despite abundance in global supplies.

November delivery light, sweet crude futures traded down 1.2% or $1.06 at $89.67 per barrel on the New York Mercantile Exchange, the lowest price from Apr. 2013.

According to The Wall Street Journal, the prices slid briefly into the bear-market during overnight trading, before rebounding later. Brent crude oil, benchmark for North Sea produced oil, traded down at 1.72%, $1.65 at $92.51 per barrel on Europe ICE Futures, the lowest price from June 2012. Since Tuesday, Brent has traded in the bear market.

Gasoline futures stood at the lowest in 3½ years. RBOB, reformulated gasoline stock for November, fell 1.2% or 5.11 cents to $2.3986 per gallon, the lowest price from Jan. 2011. During fall and winter, the demand for gasoline falls as drivers keep few cars on the road and go for fewer vacations.

With the boom in shale, the US has become the largest producer in the world of liquid petroleum, reducing the appetite for imports as there is slow demand globally.

Bloomberg quoted Tariq Zahir, Tyche Capital Advisors LLC commodity fund manager as having said, “We have more than enough supply out there and demand is not catching up. US production is just incredible. Fundamentally we are just producing so much oil.”

In comparison to yesterday’s $3.43, the grade’s premium to WTI on the ICE was $3.25 per barrel.

Last month, US crude oil production climbed to the highest since 1986 and the output of OPEC climbed to the highest level in one year. Last month, the International Energy Agency reduced its projections for growth of demand for this year and 2015 after citing weakening economic projections.

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To contact the reporter of the story: Jonathan Millet at john@forexminute.com