Oil dropped to the lowest in almost two months in New York on rising Opec output after a volatile week driven by uncertainty about the group’s intentions and the surprise election of Donald Trump.
Futures fell as much as 3.7 percent on Friday. Iran and Iraq, which want exemptions from an Organization of Petroleum Exporting Countries accord to cut production, told the group they raised output last month, while Saudi Arabia pumped near record levels. Oil has dropped about 15 percent from its October high on growing doubts that Opec will be able to finalize the Algiers accord at its Nov. 30 summit amid a refusal to cut output from almost a third of its members.
“Oil is falling today because of Opec’s self-inflicted wounds,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Opec members are confessing to large increases in production that might make achieving their Algiers deal an impossibility.”
The International Energy Agency, the Paris-based adviser to some of the world’s biggest economies, said it’s waiting to see whether President-elect Trump’s rhetoric on Iran hardens into action before revising its market forecasts. While investors took comfort from Trump’s conciliatory acceptance speech on Wednesday, rising US crude supplies served as a reminder of the inventory overhang.
West Texas Intermediate for December delivery dropped $1.32, or 3 percent, to $43.34 a barrel at 1:37 p.m. on the New York Mercantile Exchange. The contract is down 1.7 percent this week. Total volume traded was about 9 percent above the 100-day average.
WTI open interest on Nymex passed 2 million contracts for the first time ever Thursday, according to data on the CME website. Aggregate volume slipped from a record set on Wednesday, with 1.34 million contracts changing hands.
Brent for January settlement fell $1.24, or 2.7 percent, to $44.60 a barrel on the London-based ICE Futures Europe exchange. Futures slipped to the lowest since Aug. 11. Prices are 2.2 percent lower this week. The global benchmark traded at a 59-cent premium to January WTI.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose to the highest since February. A stronger US currency usually reduces the appeal of dollar-denominated raw materials as an investment.
“We have too much oil, something the IEA report yesterday and Opec today makes clear,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. “The dollar’s rocketed, which is putting downward pressure on commodities.”
Iran, freed from curbs on its oil trade in January, said it increased output by 210,000 barrels a day to 3.92 million a day in October from the previous month, according to a monthly report from Opec. Secondary sources showed a more modest addition of 27,500 barrels a day for October.
The report was updated later on Friday to include a submission from Iraq, which didn’t initially provide an output level. Iraq told the organization that it produced 4.776 million barrels a day in October, 215,000 barrels a day more than Opec’s own estimate.