Brent Oil Breaks Below $80 Dragging WTI To New Lows

Oil prices continue to dominate the global headlines as prices tumbled to record lows. WTI crude oil is trading at 74.33 gaining 12 cents on Friday morning as traders buy up the cheap commodity. At the same time, Brent oil fell below the 80 psychological barrier and could find no support as it broke down to trade at 78.04 regaining 43 cents this morning after falling to 77.50 on Thursday a long term low. Brent fell below $80 per barrel for the first time since September 2010 last night, after the US Energy Information Administration lowered its output forecast and predicted that Saudi Arabia would cut supply. The news today that China’s industrial production expanded at a slower rate in October also hit the oil price. Brent crude extended losses from a four-year low, trading near $80 a barrel amid signs that OPEC remains unwilling to reduce output.

The OPEC group is due to meet later this month, but oil analysts aren’t convinced that producers will agree action to underpin the oil price. OPEC´s next meeting is set for November 27 in Vienna, home to the cartel´s headquarters.

Saudi oil minister Ali al-Naimi tried to calm talk of a price war raging in the energy market. Good news for consumers, but bad for oil producers in the Middle East and for Russia. It also pushes down inflation, which consumers will welcome, but central bankers in the euro area will not as they are forced to artificially stimulate inflation. A group of Europe’s top economists and forecasters have slashed their growth and inflation forecasts for the eurozone, highlighting the region’s economic problems. They have warned the European Central Bank that they expect euro inflation to be just 0.5% this year, down from 0.7%; and 1.0% in 2015, down from 1.2% previously. Oil prices bounced back in Asia Friday after diving to fresh lows in the previous session on expectations that OPEC is unlikely to cut production levels to counter a global supply glut.

Concerns about a global supply glut were exacerbated after the latest US petroleum report by the Department of Energy released Thursday showed the country produced 9.063 million barrels per day in the week ended November 7. That marked the highest production since at least January 1983 when the department began publishing the statistics. 

US crude reserves at the oil hub in Cushing, Oklahoma, closely watched by traders because they serve as reference for WTI traded in New York, jumped by 1.7 million barrels last week to 22.5 million barrels.  

Dealers are largely expecting the 12-nation Organization of Petroleum Exporting Countries to decide against reducing output to stem the global supply glut, in part caused by a flood of oil extracted from shale rock in the US.  

Gasoline prices continued to fall giving a boost to consumers in the US, which should help US retail sales print better than expected later today. An economist expect October retail sales to have increased by 0.2 percent, without gasoline, autos or building materials—is expected to have risen by 0.4 percent. That compares to a decline of 0.3 percent in September and a dip in control of 0.1 percent. Economists have been looking at the impact of falling fuel prices on the economy, and many expect a benefit of several tenths of a percent on fourth-quarter GDP. But where the savings in gas prices show up in the economy is up for debate.