Bloomberg News

Oil Falls to One-Year Low on Libya Supply; Goldman Cuts Forecast

October 04, 2011

Oct. 4 (Bloomberg) -- Oil fell to its lowest in more than a year in New York on signs of rising U.S. supplies and production from Libya. Goldman Sachs Group Inc. cut its 2012 forecast for Brent crude.

Futures slid as much as 2.8 percent in New York while Brent fell to less than $100 a barrel. Goldman Sachs said Brent will average $120 a barrel next year, down from $130. U.S. crude inventories climbed for a second week, an Energy Department report tomorrow may show. Libya aims to raise production to more than 500,000 barrels a day by the end of this month, according to the chairman of state-run National Oil Corp.

“Libyan production coming back at higher quantities than originally thought is a bit bearish,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, who predicts Brent will average $107 a barrel this quarter. “The most important thing of course is the economy, and fears of slower growth in the emerging markets are a big driver. Risk is clearly on the downside.”

Crude for November delivery declined as much as $2.16 to $75.45 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Sept. 24, 2010, and was at $75.47 at 12:52 p.m. London time. Prices are down 17 percent this year.

Brent Outlook

Brent oil for November settlement fell as much as 1.8 percent to $99.84 a barrel on the London-based ICE Futures Europe exchange, trading at less than $100 for the first time since Aug. 9. The European benchmark contract was at a premium of $24.43 to New York crude, compared with a record of $26.87 on Sept. 6.

Jeffrey Currie, an oil analyst at Goldman Sachs, cited a “flatter upward trajectory” as he cut his Brent crude prediction. In a separate report, Goldman Sachs cut its global economic growth forecast for this year and next, predicting recessions in Germany and France as Europe stalls and the risk of a contraction in the U.S. grows.

European finance ministers met in Luxembourg yesterday to discuss the debt crisis. They considered “technical revisions” to a July deal that foresaw investors contributing 50 billion euros ($66 billion) to a 159 billion-euro rescue for Greece.

Hedge funds and other money managers cut bullish bets on Brent by 36 percent in the week ended Sept. 27, according to data from ICE Futures Europe. Speculative bets that prices will rise in futures and options combined outnumbered short positions by 47,027 contracts, the London-based exchange said yesterday in its weekly Commitment of Traders report.

Crude Supplies

The European benchmark future may fall to $84 a barrel after its 50-day moving average fell below the 200-day average last week in a formation known as the “death cross,” according to technical analysis by hedge fund Again Capital LLC.

Libya aims to raise oil output after the North African nation restarted the Zawiya refinery, its second largest, according to Nuri Berruien, the chairman of National Oil Corp. The country’s goal of restoring crude production to 1.7 million barrels a day within 15 months is a “conservative figure,” he said yesterday in Tripoli.

Fighting in Libya reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day in August, according to Bloomberg estimates. The North African nation pumped 100,000 barrels a day last month.

U.S. crude inventories rose 1.9 million barrels last week, according to the median of 10 analyst estimates in a Bloomberg News survey before the Energy Department report. Gasoline supplies climbed 1.23 million barrels, the survey shows.

New York crude may test technical support at around $74 a barrel and $64 a barrel, levels that correspond with the 50 and 62 percent retracement levels on a Fibonacci study from lows in January 2009, said Stephen Schork, president of Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.

--Editors: John Buckley, Raj Rajendran

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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