The rout in oil prices continued on Friday in belated response to additional buildup in US crude inventories, fueling concerns about a worsening global supply glut next year.
The West Texas Intermediate (WTI) benchmark for US crude continued to trade below $35 a barrel on the New York Mercantile Exchange. The US futures contract had touched an intraday low of $34.39 a barrel, its lowest level since early 2009.
Global benchmark Brent crude fell 12 cents or 0.3% to $36.94 a barrel, recovering from an intraday low of $36.41 a barrel on ICE Futures Europe. Friday marked Brent’s ninth drop in the past 11 days, sinking the global benchmark to its lowest level since 2008.
Oil prices are expected to deteriorate further next year, US investment bank Goldman Sachs reiterated on Friday. The bank stood by its earlier forecast of a $20 a barrel bottom, which is the breakeven cash rate for US shale producers. Goldman cited prevailing market imbalances and peak OPEC output as the main reasons for the prediction.
Earlier this month the Organization of the Petroleum Exporting Countries (OPEC) vowed to keep oil production above 30 million barrels a day in an effort to retain market share. Meanwhile, US Congressional leaders earlier this week agreed to lift a 40-year ban on oil exports, a move considered unthinkable just a few months ago .
Oil prices have been hit hard all week after US inventory data showed an unexpected surge in commercial crude stockpiles. Additional data also showed a bigger buildup at the key Cushing, Oklahoma delivery point.
In other commodities, gold prices recovered from fresh six-year lows on Friday after a Federal Reserve-induced selloff weakened demand for precious metals. Gold for February delivery rebounded $8.80 or 0.8% to $1,058.40 an ounce. The yellow metal had plunged nearly $30 in the previous session.
Silver futures also rebounded 19 cents or 1.4% to $13.89 an ounce. Platinum spot also climbed $9.52 or 1.1% to $853.30 an ounce.
The US dollar was back on its heels Friday after surging more than 1% against a basket of world peers. The dollar index, a weighted average of the US currency against six rivals, fell 0.2% to 99.04.
The oil slide weighed on global stock markets on Friday. The pan-European STOXX 600 Index declined 0.6%. All of Europe’s major averages traded in the red.
Meanwhile, Wall Street traded sharply lower after the opening bell, with the Dow Jones Industrial Average falling more than 100 points.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.