HONG KONG (BLOOMBERG) - Oil extended losses below US$40 (S$56) a barrel amid speculation that a record global glut will be prolonged as Opec abandoned its long-time strategy of limiting production to control prices.
Futures dropped as much as 1.9 per cent in New York after falling 4.2 per cent last week.
The Organisation of Petroleum Exporting Countries (Opec) will keep pumping about 31.5 million barrels a day, President Emmanuel Ibe Kachikwu said on Friday after a meeting in Vienna. The group is setting aside its output quota of 30 million barrels a day, a target breached the past 18 months, until members gather again in June.
Oil has slumped about 40 per cent since Saudi Arabia led Opec's decision in November 2014 to maintain output and defend market share against higher-cost US shale producers. Global stockpiles have expanded to almost three billion barrels as the Saudis, Russia and Iraq increased supply, according to the International Energy Agency.
"There is significant excess supply capacity around the world now that if Opec give up their share, they're just inviting someone else to take it," Mr Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. "We're far away from any situation where Opec might actually change the current position and move back to restraining supply."
Opec Quota West Texas Intermediate for January delivery declined as much as 77 US cents to US$39.20 a barrel on the New York Mercantile Exchange and was at US$39.63 at 10.06am Hong Kong time. The contract decreased US$1.11 to US$39.97 on Friday. The volume of all futures traded was almost three times the 100-day average. Prices are down 26 per cent this year.
Brent for January settlement slid as much as 25 US cents, or 0.6 per cent, to US$42.75 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of US$3.25 to WTI.
Opec set its 30 million barrel-a-day target in January 2012 and hasn't pumped below that level since May 2014. Most of the market "doesn't have any ceiling", Iraqi Oil Minister Adel Abdul Mahdi told reporters in Vienna. "Americans don't have any ceiling. Russians don't have any ceiling. Why should Opec have a ceiling?"
"Everyone does whatever they want" after Friday's decision, according to Iranian Oil Minister Bijan Namdar Zanganeh, who estimated the global surplus at as much as two million barrels a day. The Persian Gulf nation is seeking to boost crude exports next year when international sanctions over its nuclear programme are removed.
The MSCI Asia-Pacific Energy Index dropped as much as 1.6 per cent, declining for a fourth day. Oil producers retreated, with Woodside Petroleum losing as much as 2.7 per cent, while Santos falling as much as 8.5 per cent in Sydney.