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A downbeat sentiment from a Russian oil boss on the trajectory for crude oil prices sent key benchmarks diving into negative territory early Thursday.
Outside of the first week in October, crude oil prices have been holding steady in bullish territory for the better part of the third quarter. The rally is due in part to the effort by the Organization of Petroleum Exporting Countries to balance the market through coordinated production cuts, an effort that includes a handful of non-member producers like Russia.
The International Energy Agency said in its monthly market report for October that, for 2018, three out of the four quarters will show a market more or less in balance, assuming OPEC output stays the same and there are no major unforeseen disruptions.
Igor Sechin, the head of Russian oil company Rosneft, said U.S. shale oil production was out of OPEC's control and could threaten the drain on the surplus in the five-year average for global crude oil inventories.
"The balance is fragile and unstable so far," he was quoted as saying by Russian news agency Tass. "I think therefore that we should not expect a surge in oil prices in near future."
The price for Brent crude oil, the global benchmark for the price of oil, was down 1.4 percent at 9:20 a.m. EDT to $57.31 per barrel. West Texas Intermediate, the U.S. benchmark, was down 1.5 percent to $51.24 per barrel.
The difference, or spread, between Brent and WTI is making U.S. crude oil competitive on the open market. U.S exports are near record territory, though U.S. oil has only been moving freely since 2015, when former President Barack Obama lifted a 40-year-old ban on exports.
A report emailed from RBC Capital on Thursday said more U.S. oil exports could be supportive of crude oil prices.
"We have long expected the WTI discount to Brent to remain wide until the market arrives at the juncture where inventories outside the United States normalize and the call on U.S. crude exports increases to plug global supply gaps," the report read. "This is an incrementally bullish signal worth watching."
The price for Brent crude oil has made a few runs on $60 per barrel this year, but has so far failed to break through the ceiling. Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI a U.S. report on domestic oil storage drains and gasoline inventory builds helped take the steam out of the recent rally.
"The U.S. Energy Information Administration's report yesterday was mildly bearish, while the supply disruptions from northern Iraq seems to have been quantified and Iraq expect production from Kirkuk to resume over the weekend," he said.
Iraqi forces seized control over the oil fields in Kirkuk this week amid skirmishes with forces loyal to the Kurdistan Regional Government. So far, there are few indications that any disruptions to oil will be long term.
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