Oil headed for the lowest level in more than five years as analysts said a global supply glut will linger through the first half of 2015.
Crude has dropped by more than half since June as U.S. output surged and the Organization of Petroleum Exporting Countries decided to maintain its production ceiling. Saudi Arabia won't cut its output, though producers outside the group are welcome to do so, Ali Al-Naimi, that country's oil minister, said at a conference in Abu Dhabi last month. Thursday's decline accelerated as the dollar strengthened.
"The Saudis are providing no support for the market," Helima Croft, chief commodities strategist at RBC Capital in New York, said by phone. "It looks like they will let prices continue to fall, taking as much non-OPEC production offline as possible."
Oil's collapse has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs of when the rout will end. The U.S. is pumping the most crude in more than three decades as horizontal drilling and hydraulic fracturing unlock shale reserves, adding to a global supply glut that Qatar estimates at 2 million barrels a day.
Brent for February settlement decreased $1, or 2 per cent, to $50.15 a barrel at 2:06 p.m. New York time on the London- based ICE Futures Europe exchange, heading for the lowest settlement since April 2009.
West Texas Intermediate for February delivery slid 70 cents, or 1.4 per cent, to $47.95 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 14 percent above the 100-day average for the time of day. Brent traded at a $2.17 premium to WTI on the ICE, the smallest since October
U.S. output expanded to 9.14 million barrels a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983.
Credit Suisse Group AG cut its forecast for this year's increase in U.S. crude output by 500,000 barrels a day, David Hewitt, the co-head of the bank's global oil and gas equity research, said at an investor conference in Singapore Thursday. Growth may slow by 800,000 barrels a day in 2016 compared with its previous estimate, he said.
Credit Suisse had previously expected U.S. production to accelerate by 1.3 million barrels a day in 2015, and 1.4 million next year, he said. Brent crude will average $75 a barrel this year and $80 in 2016, according to Hewitt.
U.S. crude exports climbed 34 per cent to 502,000 barrels a day in November, the most in records dating back to 1920, data from the Census Bureau and the EIA show. Some lawmakers in Washington are seeking to end a 40-year-old law that restricts crude sales to just a few overseas markets.
The Bloomberg Dollar Spot Index increased to 1,147.71. A stronger dollar reduces oil's investment appeal.
"The dollar put downward pressure on oil," said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. "The fundamentals of oil are still very bearish."
Gasoline futures slipped 1.1 per cent to $1.3236 a gallon. Ultra low sulfur diesel declined 0.7 percent to $1.6889.
Regular gasoline at U.S. pumps fell to the lowest level since May 2009. The average retail price slipped 0.9 cent to $2.182 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation's biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel.