Oil prices tumbled on Monday, settling 5 percent lower as traders took profits after last week's surge to an 11-week high, and on a report that OPEC continued to boost crude production despite a persistent glut. Both Brent and US crude futures posted the biggest percentage declines since the start of September with the North Sea crude settling down $2.79 at $49.86 and West Texas Intermediate off $2.53 at $47.10.
Last week, the US front-month crude contract surged, breaching the 100-day moving average. It almost came within a cent of the 200-day moving average on Friday. "The fundamentals haven't changed and there was strong resistance at the 100-day and 200-day moving averages for US crude and if prices continue to weaken it could put more pressure on traders with long positions to get out of those," said Tariq Zahir, analyst at Tyche Capital Advisors in New York.
Secondary sources cited in OPEC's monthly report said the group pumped 31.57 million bpd in September, up 110,000 bpd from August and almost 2 million bpd more than its demand prediction for this year. OPEC trimmed its estimate of 2016 world oil demand growth by 40,000 bpd to 1.25 million bpd, citing slower growth in China. "The OPEC demand forecast for 2016... suggests some concern about the strength of demand next year. We are primarily wary of this risk," said Richard Hastings, macro strategist at Seaport Global Securities that was formed by the merger of The Seaport Group and Global Hunter Securities.
"All of it puts a rebalancing phase deeper into 2016," Hastings added. Traders said another factor pressuring prices was that energy intelligence firm Genscape projected a crude stock build in the Cushing, Oklahoma oil hub. Kuwait Oil Minister Ali al-Omair said there were no calls within OPEC to change the production policy and that lower output from high-cost producers could support prices in 2016, adding to signs OPEC will keep its strategy of defending market share. Oil has been on a roller-coaster ride over the last few weeks, recovering from six-year lows in turbulent trade. North Sea Brent crude dropped to almost $42 a barrel in August, from a peak above $115 in June 2014, but then rallied back to an intraday high of $54.05 on Friday.
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