Nymex oil settles at lowest since late May

SAN FRANCISCO (MarketWatch) — Nymex oil futures fell Monday with strong crude exports from Saudi Arabia, expectations for progress on talks over Iran's disputed nuclear program and comments from U.S. Federal Reserve officials leaning toward a pullback in the central bank's stimulus program contributing to the lowest price settlement since the end of May.

December crude (CLZ3)  lost 81 cents, or 0.9%, to settle at $93.03 a barrel on the New York Mercantile Exchange — the lowest close for a most-active contract since May 31, FactSet data show. Prices, which fell 0.8% last week, marked their sixth consecutive week of losses on Friday. That was also their longest stretch of weekly declines in about 15 years.

On the ICE Futures exchange, January Brent crude (UK:LCOF4)  settled at $108.47 a barrel, down 3 cents, after scoring a gain of roughly 3% last week.

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The price spread between the European benchmark Brent crude and U.S. benchmark West Texas Intermediate crude traded on Nymex topped $15 a barrel on Monday.

Comments Monday from William Dudley, president of the New York Federal Reserve, that the economy is doing better prompted a selloff for Nymex oil as tapering fears return, said Phil Flynn, a senior market analyst at Price Futures Group.

The U.S. economy could be doing better and anemic growth could give way to stronger growth over the next two years, Dudley said in a speech at Queens College. Also Monday, President of the Philadelphia Fed, Charles Plosser said the central bank should bring an end to its asset-purchase program.

The comments from the two officials raised expectations that the Fed may soon decide to begin tapering its bond-buying stimulus program. The program has been seen as supportive of energy demand.

Flood of factors

But there were many other factors for oil traders to consider.

"Some of the slump in U.S. oil prices today reflects increased U.S. production and competitive issues with Saudi Arabia, which has the capacity to very quickly increase output and exports — something not as simple or as cheap over here," said Richard Hastings, a macro strategist at Global Hunter Securities.

News reports, citing data from the Joint Organization Data Initiative's website, said Saudi Arabia's September exports reached the highest monthly level since Nov. 2005.

/quotes/zigman/2237079/realtime CLZ3 92.95, -0.89, -0.95% /quotes/zigman/2648923/realtime LCOF4 108.20, -0.30, -0.28%

"The nation in September exported the most crude in some eight years — suggesting supply is still adequate to meet demand on a global scale," said Eric Bickel, a commodity analyst at Schneider Electric, in a daily note.

A Citigroup report suggests that the Organization of the Petroleum Exporting Countries may need to cut its output in 2014 to keep the market balanced, as non-OPEC supply growth rates continue to outpace growth rates in demand, according to Bickel. "As the perennial balancer of the market, the onus falls on OPEC to keep the market's supply from far outweighing demand," he said.

The cartel is scheduled to hold its next ordinary meeting on Dec. 4 in Vienna.

There was also some talk of a return of Libyan oil production, said Flynn, but there also continued to be reports of ongoing political unrest.

Continued increases in U.S. crude inventories also kept pressure on oil prices. U.S. supplies climbed for an eighth consecutive week, as of the week ended Nov. 8, according to the latest data from the U.S. Energy Information Administration.

But news of plans for economic reforms in China, the world's second-largest oil consumer, kept a cap on losses for oil prices early Monday.

Late Friday, China's government announced a 60-point list of policy tasks, tackling a wide range of issues from financial markets and state-owned enterprises (SOEs) to legal reforms and the one-child policy.

Meanwhile, the oil markets looked forward to further talks between Iran and world powers over Iran's disputed nuclear program. The talks were set to begin Nov. 20 in Geneva, according to news reports. They could lead to an easing of oil sanctions on Iran.

Traders are waiting for something material to actually develop because "most market participants are getting tired of the lack of progress that has come from the negotiations," said Tyler Richey, an analyst for the 7:00's Report, which offers daily markets commentary.

Back on Nymex, December gasoline (RBZ3)  closed about flat at $2.66 a gallon, while December heating oil (HOZ3)  ended at $2.92 a gallon, down nearly 2 cents, or 0.6%.

December natural gas (NGZ13)  was at $3.62 per million British thermal units, to finish with a loss of 4 cents, or 1.2%, after earlier touching a high above $3.70, jostled around as traders weighed the de0mand prospects for the heating fuel.