Oil fell more than $2 to below $64 a barrel on Friday and in line with other markets was on track to post its biggest monthly fall yet.
The slide followed weak US economic data that provided the latest indication of sharply reduced demand for fuel from the world’s biggest energy consumer. US light crude for December delivery fell $2.46 to $63.50 a barrel by noon, just off a session low of $63.12. It has fallen by around 35% this month, its steepest decline to date. London Brent crude was down $2.55 to $61.16.
“Oil is falling on a poor outlook for demand and the realization that rate cuts will take a long time to lead to a recovery,” said Christopher Bellew at Bache Commodities. Data released on Thursday showed US gross domestic product contracted at an annual rate of 0.3% for the Q3.
It was the sharpest fall in the world’s largest oil consumer in seven years and provoked further falls across commodities and global stock markets, which were also poised for their worst month yet. A stronger US dollar, which makes dollar-denominated assets less attractive to buyers, added to the pressure on commodities. In three months oil has wiped out gains that took more than a year to build. It has lost more than half of its value since it struck a record high of $147.27 in July.
While focused on mounting evidence demand has been destroyed by economic weakness across the world, the market has largely ignored signs of tighter supplies. Following a decision last week by the Organization of the Petroleum Exporting Countries to cut output by 1.5 million barrels per day (bpd), evidence has begun to emerge the group means what it said.
Nigeria informed customers of a 5% cut in exports in November and December following on from an announcement earlier in the week by the United Arab Emirates. Top exporter Saudi Arabia has yet to inform customers of any fresh curbs. Venezuelan Oil Minister Rafael Ramirez said Thursday OPEC should cut oil output by another 1 million bpd -- possibly before its next scheduled meeting in December -- and should set a minimum price target of $70 or $80 a barrel. (Reuters)