Crude Oil Markets Roiled by Sell Off
A sell-off that began last week continued to roil crude markets, which have been weighed down by worries of oversupply and lackluster demand, pushing Brent crude to a contract low on Monday.
U.S. crude traded below $90 a barrel, despite a brief mid-morning rally, while Brent traded below $92 a barrel. Traders and analysts expressed uncertainty about how far global oil benchmarks could fall.
"Supply continues to weigh heavy on the market and demand isn't keeping up with it," said Oliver Sloup, director of managed futures at iitrader.com LLC in Chicago. "At some point, producers will have to taper down production and right now, there's no reason to pick a bottom."
U.S. November crude was down 23 cents at $89.51 a barrel 11:35 a.m. EDT (1535 GMT). The benchmark had touched an intraday low of $88.76 a barrel at 10:38 a.m. EDT (1438 GMT) before rallying some 86 cents in the next 45 minutes.
Brent for November was down 69 cents at $91.62 a barrel. The benchmark touched a contract low of $91.25 a barrel intraday, after reaching $91.48 a barrel on Friday, its lowest since June 2012.
"It is no surprise to see the price stabilising after the massive sell-offs last week, but we won't see a hard price floor until OPEC indicates that it will cut production," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
Tony Machacek, an oil trader at Jefferies in London, said that many traders were buying options to insure against prices falling to $80, reflecting uncertainty in the markets.
"I still believe the market is solidly in a downward trend," he added.
Crude has seen significant declines in the past month due to a global supply glut and the strength of the dollar, which touched a four-year high on Friday against a basket of currencies, making oil more costly for buyers using other currencies.
But the overall trend for demand has been weak this year. London-based consultancy Energy Aspects forecasts demand growth for 2014 at around 1 million barrels per day below supply growth, oil analyst Virendra Chauhan told the Reuters Global Oil Forum.
Libyan output has increased rapidly since the summer, while conflict in northern Iraq has failed to dent supply. Islamic State militants have so far failed to make an impression in the country's southern oil-producing provinces.
The Organization of the Petroleum Exporting Countries (OPEC) has not given any formal indication that it will cut supply at or before its Nov. 27 meeting.
Many analysts expect OPEC to cut production if the oil price approaches $90.
"The market is discounting any supply disruptions that we've seen in Libya and Nigeria. I think we could have continued weakness in the market as the longs continue to bail on their positions," said Andrew Lipow, president of Lipow Oil Associates in Houston, Texas.
(Reuters: Additional reporting by Sam Wilkin in London, Keith Wallis in Singapore; Editing by Christopher Johnson, Pravin Char and Marguerita Choy)