Oil Tumbles to 4-Year Low Before OPEC, Pulling Down Krone

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Oil slid to a four-year low amid speculation OPEC will refrain from cutting output at today’s meeting, dragging down shares of energy companies, Gulf-region stocks, and the Norwegian krone. Government bonds rose, with yields in Europe falling to record lows.

West Texas Intermediate crude tumbled 2.1 percent to $72.15 a barrel at 11:07 a.m. London time, a fourth-straight decline. While the Stoxx Europe 600 Index gained 0.2 percent after data showed record-low German unemployment, a gauge of energy producers slid 1.3 percent. Qatar and Oman led stocks lower in the Gulf region, and Norway’s krone weakened against all its 16 major counterparts. France’s 10-year yield fell to an all-time low of 1.006 percent.

Representatives from the 12-member Organization of Petroleum Exporting Countries are meeting in Vienna, with oil prices mired in a bear market. The 27 percent drop this year has pulled the Stoxx 600 Oil & Gas Index down 6.5 percent, weakened currencies of commodity-producing nations and damped inflation, helping fuel a rally in fixed-income assets. Germany will release consumer-price data today as investors weigh whether theEuropean Central Bank will step up stimulus. Most U.S. markets are closed for Thanksgiving.

“OPEC is the main event,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said by phone. “The Saudis’ actions over the past month quite clearly indicate to the market that OPEC is unlikely to agree to production cuts, or if they do, the market will doubt the intent to deliver.”

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Bloomberg: Oil Volatility Here to Stay Regardless of OPEC Decision

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Whatever the outcome of tomorrow’s OPEC meeting, options traders are betting on oil-price swings.

That’s because the decision from the Organization of Petroleum Exporting Countries isn’t likely to make much difference. Slowing global demand and a U.S. shale-drilling boom has created a glut that won’t fade any time soon, said Torbjoern Kjus of DNB ASA in Norway.

Half of analysts surveyed by Bloomberg expect a cut in production at the meeting in Vienna tomorrow; the rest don’t see a deviation from OPEC’s 30 million barrel-a-day target. Yet an index tracking expectations for moves in oil prices reached the highest ever versus a gauge that measures volatility in equities, according to Bloomberg data going back to May 2007.

“We are still talking about a market that is 2-million barrels-a-day oversupplied in the first half of next year,” said Kjus, a senior oil market analyst at DNB. “Even if OPEC delivers on net production cuts, we don’t think that will be enough. We are not talking enough to turn this market around.”

The Chicago Board Options Exchange Crude Oil Volatility Index, which tracks the cost of options on an exchange-traded fund tracking the commodity, has more than doubledfrom a low this year in June. The CBOE Volatility Index measuring options prices on the Standard & Poor’s 500 Index has advanced 14 percent in the same period.

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Oil Near 4-Year Low as OPEC Seen Resisting Cutting Output

Today on Bloomberg…

West Texas Intermediate crude dropped for a third day as U.S. oil inventories gained unexpectedly. Brent rose in London.

Futures fell as much as 1 percent in New York. Ecuador and Venezuela will ask members of the Organization of Petroleum Exporting Countries to reduce excess output, an Ecuador official said. A car with explosives blew up in Erbil in Iraq’s Kurdish region, the local Rudaw news agency reported, with Al Jazeera television reporting six people killed. U.S. crude inventories expanded by 3.7 million barrels last week, countering forecasts expecting a drop, the American Petroleum Institute said yesterday. The Department of Energy’s stockpile figures will be published later today.

Oil has collapsed into a bear market as the U.S. pumps at the fastest pace in more than three decades amid signs of slowing demand. Leading OPEC producers including Saudi Arabia andKuwait are resisting calls to cut output ahead of a Nov. 27 meeting in Vienna. The 12-member group supplies about 40 percent of the world’s oil.

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Oil lower as producers scramble to find support for prices

Both Brent and WTI fell back overnight on the Japanese growth news but they’ve been held up by growing chatter of productions cuts by OPEC producers. Officials from producing countries are going to be scurrying about meeting each other ahead of the main OPEC meeting at the end of the month, in an effort to stabilise prices.

They’ve got a big battle on their hands with the Saudis who want to try and protect their market share. Here’s a couple of graphs that justify their fears of losing out to the US.

OPEC-share-of-production-since-2000

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Author: Ryan Littlestone

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