Oil posts worst drop in more than two months on bearish Opec outlook

Futures dropped 5.1% in New York on Friday

Demand for crude may pick up during the course of the year because of a recovery in the manufacturing and agricultural sectors. AFP

Oil fell the most in more than two-and-a-half months amid signals that Opec and allied crude producers are averse to deepening output cuts when they convene next week.

Futures dropped 5.1 per cent in New York on Friday, closing the US benchmark’s poorest weekly performance since early October.

Russia’s oil minister said it would be better to postpone any new supply caps until April, the Tass news agency reported. In the US, futures-trading volume was suppressed on the day after the Thanksgiving holiday, increasing the potential for dramatic price moves.

“The Opec accord with Russia could be fraying a bit,” said John Kilduff, a partner at Again Capital. “It undercuts and undermines everyone’s perception of the commitment.”

Opec and allies including Russia are expected to extend the current supply pact, rather than make deeper reductions, when they meet in Vienna late next week, a Bloomberg survey showed.

That comes as government data showed the US was a net exporter of crude and refined products for a full month for the first time in at least seven decades. The milestone, which was only previously reached on a weekly basis, underscored the growing influence of American crude in foreign markets, a point that won’t be lost on Opec.

Despite Friday’s slump, New York-traded futures were on track for the biggest monthly advance since June amid optimism the the US and China are closing in on a trade accord. As for Opec, a special committee that analyses market data before ministerial meetings didn’t consider steeper cuts, according to sources.

West Texas Intermediate for January delivery slipped $2.94 to settle at $55.17 a barrel on the New York Mercantile Exchange. There was no settlement Thursday due to the US holiday and all transactions will be booked Friday.

Brent for January settlement, which expires Friday, dropped $1.44 to $62.43 on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $7.26 premium to WTI.

Ministers from the Organisation of Petroleum Exporting Countries and its partners will meet in Vienna on December 5 to 6 to decide on policy going forward.