Oil falls for fifth day as Goldman Sachs sees $45 crude by October

A drilling rig seen near Kennedy, Texas. Eric Gay / AP Photo

Oil slid for a fifth day amid speculation that a recovery in prices is premature and will help sustain a supply glut.

Futures slid as much as 0.4 per cent in New York, extending a 2.2 per cent decline in the past four sessions. Crude is poised to slump to $45 a barrel by October as a surplus of supplies and producers’ easy access to cash weigh on prices, according to Goldman Sachs. Saudi Arabia shipped more oil in March than in any month since November 2005 as the world’s biggest exporter battled for market share.

Oil’s rebound from a six-year low in March has faltered near $60 a barrel amid speculation that rising prices will encourage production in US shale formations. Opec, led by Saudi Arabia, has resisted calls to reduce output, exacerbating the market oversupply. The group next meets on June 5 in Vienna.

“There is still ample supply for the demand that we’re seeing,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “We’ve probably seen the bottom but it could still be volatile on the downside until we do get real production cuts.”

West Texas Intermediate for July delivery was 12 cents lower at $60.12 a barrel in electronic trading on the New York Mercantile Exchange at 2.58pm Singapore time. June futures, which expire Tuesday, fell 13 cents to $59.30. The volume of all futures traded was about 52 per cent below the 100-day average. Front-month prices are up about 11 per cent this year.

Brent for July settlement slid 26 cents to $66.01 a barrel on the London-based ICE Futures Europe exchange. It decreased 0.8 per cent to $66.27 on Monday. The European benchmark crude traded at a premium of $5.89 to WTI for the same month.

The availability of cheaper external capital exacerbates the need for sustained low prices to keep US producing assets from quickly being redeployed, Goldman analysts including Jeffrey Currie said in an emailed report dated May 18.

Drillers in the US, the world’s biggest oil user, reduced the number of active machines by eight to 660 through May 15, extending a retreat that began in December, according to data from Baker Hughes

US crude inventories probably shrank by 2 million barrels through May 15, according to a Bloomberg survey before an Energy Information Administration report on Wednesday. They dropped to 484.8 million barrels in the week ended May 8, EIA data showed last week.

Supplies still remain near the highest level in 85 years, based on monthly records dating back to 1920, and are more than 100 million barrels above the five-year average for this time of the year.

Saudi Arabia, the biggest producer in Opec, shipped 7.9 million barrels a day of crude in March, up 548,000 barrels a day from February, according to figures published Monday on the website of the Joint Organisations Data Initiative. Iraq exported 2.98 million barrels a day in March, the most since at least January 2007 when it began submitting data to JODI.

Opec, which supplies about 40 per cent of the world’s crude, agreed at a November meeting to maintain its collective production target at 30 million barrels a day. The current output quota is right, Iran’s deputy oil minister Roknoddin Javadi said in Kuala Lumpur on Monday.

While Opec will look at things such as supply and demand before making a decision on its output quota at its next meeting in June, the current situation differs from November, with prices improving, Nawal al-Fezaia, Kuwait’s governor to the 12- member group, told reporters in Kuwait City Monday.

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