Brent oil near 4-year low as glut seen untouched by OPEC

Futures slid as much as 1 percent in London. The Organization of Petroleum Exporting Countries' production dropped by 226,400 barrels a day last month to 30.253 million, the largest decrease since March, led by a drop in output from Saudi Arabia, the group said in its monthly report. Test production started at Libya's largest oil field after halting last week, according to the National Oil Corp. Brent has lost about 30 percent since its June peak amid speculation that global supply is outpacing demand. Leading OPEC members are resisting calls to cut the group's output target and instead reduced export prices to the U.S., where they're competing with the fastest pace of production in more than three decades. The group, which pumps 40 percent of the world's oil, is scheduled to meet on Nov. 27 in Vienna. "A 70,000-barrel reduction from Saudi Arabia is clearly not helping the current supply glut, which by OPEC's own admission is expected to rise next year," Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail. "This report will only add to the current negative momentum in the market." Brent for December settlement declined as much as 85 cents to $80.82 a barrel on the London-based ICE Futures Europe exchange and was at $81.05 at 1:38 p.m. local time. The contract, which expires tomorrow, closed at $81.67 yesterday, the lowest since October 2010. The more-active January contract was down 64 cents at $81.75 a barrel. Front-month prices have decreased 27 percent this year. Supply Reduction WTI for December delivery dropped as much as 88 cents, or 1.1 percent, to $77.06 a barrel in electronic trading on the New York Mercantile Exchange. The volume of all futures was about 2 percent above the 100-day average for the time of day. The U.S. benchmark crude was at a $3.83 discount to Brent for the same month. It closed at $3.73 yesterday, the narrowest spread in three weeks. Saudi Arabia's production fell 69,900 barrels a day to 9.603 million last month, OPEC said. The data are based on estimates from sources including analysts and media organizations. Saudi Arabia's own submission showed a decrease of 13,700 barrels daily to 9.69 million barrels. OPEC's forecasts for global demand, and the amount of crude it will need to supply this year and next were unchanged from its last monthly report. World oil consumption will increase by 1.19 million barrels a day in 2015 to 92.38 million a day, it said. There are signs of global economic recovery that should result in a pick-up in demand, it said. OPEC Target Kuwait, OPEC's third-largest producer, said it doesn't expect a cut to the group's 30-million-barrel daily production target, while Libya, Venezuela and Ecuador have called for action to keep prices from falling further. The 12-member group is undecided on a production cut, Angola's Deputy Oil Minister Anibal Octavio da Silva said yesterday in Acapulco, Mexico. Saudi Arabia's oil minister, Ali Al-Naimi, is set to deliver a speech at the same event later today. "OPEC will still need to address the current imbalance in the market," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, said by e-mail from London. "Removing 1 to 1.5 million barrels a day of crude from the market will shift perceptions around the headline global imbalance." Test production has started at Libya's Sharara oil field while the Elephant field is preparing to resume, Mohamed Elharari, National Oil Corp. spokesman, said by phone today. The two fields together accounted for almost 45 percent of the nation's output last month, according to NOC. U.S. Stockpiles The U.S. shale boom masks threats to global oil supply including Middle East turmoil, conflict in Ukraine and the difficulty of unconventional oil production beyond North America, theInternational Energy Agency said today. "The global energy system is in danger of falling short of the hopes and expectations placed upon it," the IEA said in its annual World Energy Outlook. "The short-term picture of a well-supplied oil market should not disguise the challenges that lie ahead as reliance grows on a relatively small number of producers." U.S. crude inventories probably rose by 1.1 million barrels to 381.3 million barrels last week, the highest level since July, according to the median estimate in the Bloomberg survey of nine analysts before tomorrow's report from the Energy Information Administration. Gasoline stockpiles are projected to have climbed by 350,000 barrels, the survey shows. Distillate fuels, including heating oil and diesel, are forecast to have declined by 1.5 million. The American Petroleum Institute in Washington is scheduled to publish separate supply data today. The industry group collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department's statistical arm. Source: Bloomberg