Oil Closes Below $89 as OPEC Meeting Looms
Oil closed down more than $2 to a one-month low below $89 per barrel on Friday, as expectations that OPEC could agree to boost output at a meeting next week weighed on the market.
Analysts said that a dip in the price below $90, a key point on the price charts that many traders use as a guide, had triggered further selling, which has helped drive prices down by around $10 since Monday.
U.S. light, sweet crude fell $2.30 to close Friday Nymex trade at $88.71 per barrel, off lows of $88.52, its lowest for a month.
It had settled 39 cents higher at $91.01 a barrel on Thursday, having jumped as high as $95.17 earlier, after an explosion in the United States temporarily halted crude supplies along an important Canada-U.S. pipeline.
London Brent crude was $1.62 down at $88.60 per barrel, off lows of $87.55.
"Now that we have broken $90, the momentum is starting to go to the downside. Technically, $90 is a really key support level," said Olivier Jakob of Petromatrix.
"There is room for the downside now. This is more of a structural correction," he added.
The market is also looking ahead to the meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Abu Dhabi on Dec. 5.
Saudi Oil Minister Ali al-Naimi said it remained to be seen whether OPEC needed to boost output.
"There is absolutely ample supply," he told reporters in Doha. "The price movement has nothing to do with the fundamentals of the market."
The Crux: OPEC
Prices zoomed up more than $4 on Thursday after an explosion along the Enbridge Pipeline from Canada, which supplies more than 10 percent of U.S. crude imports, killed two workers and choked off crude flows.
But concerns of a severe supply disruption to top consumer the United States faded when three of the four pipelines shut restarted. The remaining line could return to service within a few days.
The U.S. Department of Energy said it was prepared to open up the emergency crude stockpile to compensate for the disruption, but had yet to receive any requests.
Traders said the market had by and large shrugged off the Enbridge impact.
"We are now looking at OPEC, and we're going to be running into the weekend looking at OPEC. It's going to be the key. Will they, won't they? And how much are they going to add on or not," said Rob Laughlin at MF Global.
Some OPEC members say the oil market is well supplied.
"One day you see the price close to $100 and then close to $90. Some people are locking their profits in. At the moment this market is being controlled by speculators. We feel the market is adequately supplied," Libya's National Oil Corporation Chairman Shokri Ghanem told Reuters.
The oil market is betting the exporter group could decide to boost output by 500,000 barrels per day (bpd). An earlier OPEC meeting in September agreed to raise production by 500,000 bpd.
Oil had risen more than 40 percent since August and came close to breaking the $100 mark, driven by the weak dollar, concerns over shrinking supplies ahead of winter and speculative plays.