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Crude futures fall 5%, amid spike in OPEC supply last month

Published 10/12/2015, 02:22 PM
Updated 10/12/2015, 02:35 PM
WTI crude fell below $48 a barrel on Monday, while brent closed under $51

Investing.com -- Crude futures tumbled more than 5% on Monday, as energy traders locked into profits from last week's three-month high, amid indications of a tightening in the global supply-demand imbalance.

Investors also reacted to a monthly report from OPEC, which showed that the world's largest oil cartel pumped more than 31.5 million barrels per day in September, an increase of 110,000 bpd from the previous month.

On the New York Mercantile Exchange, WTI crude for November delivery traded in a broad range between $47.06 and $50.13, before settling at $47.11, down 2.52 or 5.06% on the session. Last week, Texas Long Sweet futures soared more than 3.3% on consecutive trading days, to move above $50 a barrel and reach its highest level since mid-July. Previously, WTI crude closed higher in six of its last seven sessions.

On the Intercontinental Exchange (ICE), brent crude for December delivery wavered between $50.19 and $53.62, before closing at $50.21, down 2.70 or 5.11% on the day. Brent futures also spiked last week, soaring above $54 a barrel, its highest level since late-August.

The surge in OPEC production last month coincides with forecasts of stronger demand over the next year. In 2016, the organization projects that global oil demand will increase to 94.11 million barrels per day, up from previous estimates of 92.86 bpd. Citing stronger than expected demand in the U.S. and Europe, as well as South Korea, OPEC Secretary General Abdalla Salem El-Badri expects to see robust demand in global energy markets over the next 12 months.

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Separately, Kuwait oil minister Ali al-Omair offered no signals on Monday that OPEC will alter its production strategy, days after reports surfaced that Saudi Arabia and Russia could meet again in the coming weeks to craft a strategy to stabilize crashing prices. While Russia has reportedly urged OPEC to lower supply levels over the next year, it still appears reluctant to surrender market share.

The cartel also projected in its monthly report that non-OPEC supply growth next year will wane dramatically, as U.S. shale producers are forced to continue to slash output amid lower prices. In 2016, OPEC forecasts that non-OPEC supply will increase by 720,000 bpd, down from previous estimates of 1.3 million. Last Friday, oil services firm Baker Hughes (N:BHI) said the number of U.S. oil rigs fell for a sixth consecutive week, offering another signal that producers have been forced to reduce the number of wells kept online in the face of near-record low prices.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell to an intraday low of 94.67 on Monday, its lowest level in three weeks. In U.S. afternoon trading, the index stood at 94.86, down 0.07% on the session.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

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