Oil ends the week at lowest level so far in 2018

London — Oil prices fell on Friday to their lowest in 2018, on course for their biggest one-month decline since late 2014 when Opec opted to pump as much crude as it could to gain market share and sent prices on a near-unbroken two-year slide.

Global supply, led by the US, is growing more quickly than demand and to ward off a build-up of unused fuel such as the one that emerged in 2015, Opec is expected to start withholding output after a meeting planned for December 6.

But this has done little so far to prop up the price. The value of a barrel of oil has dropped 17 % so far in November, in a seven-week streak of losses.

Brent crude oil futures fell 80 US cents on the day to $61.89 a barrel by 9.47am GMT, having hit a session low of $61.52, while US West Texas Intermediate (WTI) crude futures lost $1.04 to trade at $53.23 a barrel.

“The question is now how much longer bears are able to keep firing. Are they going to run out of ammunition shortly or they have ample supply of bullets?” PVM Oil Associates strategist Tamas Varga said.

“It is reasonable to compare the current economic and supply-demand picture with the one four years ago. After all, it was in November and December 2014 when oil prices fell more or less to the same level where they are now,” he said.

Volatility as a result has spiked to its highest since late 2016, as investors have rushed to buy protection against further steep price declines.

Volatility, a measure of investor demand for a particular option, has jumped above 60% for very bearish near-term sell options, double what it was two weeks ago.

Global oil supply has surged in 2018. The International Energy Agency expects nonOpec output alone to rise by 2.3-million barrels per day (bpd) in 2018, up from its forecast six months ago of 1.8-million bpd.

Demand in 2019, meanwhile, is expected to grow at a rate of 1.3-million bpd, compared with a forecast of 1.5-million bpd six months ago.

Adjusting to lower demand, top crude exporter Saudi Arabia said on Thursday that it may reduce supply as it pushes Opec to agree to a joint output cut of 1.4-million bpd.

“Oil fundamentals have weakened since Brent peaked at $85 a barrel, justifying much of the recent price decline, in our view. However, this opens up a relatively favourable risk-reward outlook around the Opec meeting,” Morgan Stanley analysts said in a note.

Reuters