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Oil slipped further after concerns that supplies are overtaking demand triggered the longest weekly losing streak in five years.
Brent futures, the global benchmark, traded below US$76 a barrel after sliding for seven weeks in a row as traders shrugged off the latest announcement of production cuts by the OPEC+ alliance.
The market briefly perked up on Friday as the U.S. announced plans to refill the Strategic Petroleum Reserve, while the country’s jobs report showed a better-than-expected reading. The busiest year-end travel season expected in the U.S. since 2000 is also shoring up the demand outlook.
Yet the spreads between monthly contracts, a critical barometer for supply and demand, continue to indicate weakness. Three-month spreads for both Brent and the American marker, West Texas Intermediate, are showing a discount on prompt versus delayed barrels, a bearish structure known as contango.
Oil has dropped by about a fifth since late September as output surges in the U.S. and other key producers, while forecasters predict slower Chinese demand growth and see lingering risks of a U.S. recession.
At the same time, production cuts from Saudi Arabia and Russia, and pledges to prolong them if necessary, have failed to stem the slide.
“There is little doubt that the oil complex remains in a state of vulnerability,” said John Evans, an analyst at brokers PVM Oil Associates Ltd. in London.
This week, International Energy Agency, the Organization of Petroleum Exporting Countries and the U.S. Energy Department will publish their latest monthly assessments of market fundamentals. Investors will also monitor the U.S. Federal Reserve’s final rate decision of the year.
Consumers including airlines and utilities have taken advantage of the recent rout to lock in cheaper barrels. A flurry of call spreads traded in Brent, which limits the impact to buyers of a rebound in crude prices.
- Brent for February settlement fell 0.3 per cent to $75.62 a barrel at 10:24 a.m. in London. Brent’s three-month spread was 25 cents in contango, compared with 86 cents in the opposite, bullish backwardated structure a month ago.
- WTI for January delivery was 0.4 per cent lower at $70.93 a barrel.