Oil prices were headed to settle at multiyear lows on Friday with worries about the global oil glut continuing to put pressure on the market.
January delivery Light, sweet crude oil traded down 1.8% or $1.23 to $65.58 per barrel on the New York Mercantile Exchange, headed for the lowest settlement since 2009.
Brent, the global benchmark, traded down 1.5% or $1.03 to $68.61 per barrel on the ICE Futures Europe. Oil futures have dropped to multiyear lows in the recent months amid strong supply growth, as reported by The Wall Street Journal.
Brent prices dropped to a low of more than four years on Thursday after Saudi Arabia lowered its prices for oil in the US, indicating that it was focusing on maintaining a market share in a low-priced environment instead of reducing production to lower the surplus of crude globally.
Managing member at Tyche Capital Advisors, Tariq Zahir said, “The Saudi Arabia news really caught people a little off-guard here.”
Ed Kevelson, head of US energy over the counter sales at brokerage Newedge USA said that the prices are likely to remain under pressure until the traders see indications that the supplies will drop as producers start pulling back on new investments or drilling.
Kevelson said, “The market’s been searching for a true bottom. I don’t think the price action that we’re seeing implies a bottom.”
CNBC quoted Eugen Weinberg analyst at Commerzbank as having said, “It’s been weighing on the market, showing that OPEC is not ready to end its price war. The lower the better seems to be the new paradigm for OPEC.”
The US added 321,000 jobs last month, the strongest month of employment since January 2012. Higher employment could lead to stronger demand for petroleum products, especially gasoline.
January diesel dropped 0.6% or 1.32 cents to $2.1045 per gallon.
January reformulated gasoline blendstock dropped recently 1.6% or 2.92 cents to $1.7656.
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