* Saudi oil minister says output is higher than 10.7 million b/d
* Brent sinks $2.89 to $59.71, heads for seventh weekly loss

By Grant Smith

(Bloomberg) —

Oil slumped below $60 a barrel in London for the first time in a year after Saudi Arabia signaled its output may have reached a record high and growing U.S. stockpiles stoked concerns over a potential supply glut.

Brent futures dropped as much as 4.7 percent, set for a seventh weekly decline. Traders are focused on the growing risks of a new glut of crude: Saudi Arabia’s oil minister said Thursday production from the world’s largest exporter climbed further this month after a surge in October, and U.S. stockpiles have risen for nine straight weeks.

The Saudis have signaled they will throttle back production in December, but unless OPEC and Russia can reach a new deal to constrain supply at their meeting next month, analysts see the prospect of sustained oversupply in 2019, undoing the group’s success over the last two years to drain global inventories.

Crude collapsed into a bear market this month after the U.S. allowed some nations to continue buying Iranian crude. Trade tension between America and China is raising concerns over demand and President Donald Trump has renewed his call on Saudi Arabia to lower prices further. These factors pushed up oil’s volatility this week to the highest since 2016.

“Prices have taken a dive as Trump continues to put pressure on OPEC and Saudi Arabia to create a low-price environment, and that has coupled with increasing American stockpiles,” said Hong Sungki, a Seoul-based commodities trader at NH Investment & Securities Co. “A potential game-changer will be what OPEC+ agrees to do in terms of supply.”

Brent for January settlement fell as much as $2.89 to $59.71 a barrel on the London-based ICE Futures Europe exchange, and headed for a 11 percent weekly loss. The global benchmark crude traded at a $8.70 premium to WTI. Total volume traded was 43 percent above the 100-day average.

West Texas Intermediate for January delivery lost as much as $3.37 to $51.26 a barrel on the New York Mercantile Exchange. The contract is on course for a 8.9 percent decline this week, the longest weekly stretch of drops since August. There was no settlement on Thursday due to U.S. Thanksgiving holiday.

See also: Global Oil Benchmarks Extend Slide on Bearish Technical Signals

Earlier this month, the Organization of Petroleum Exporting Countries and allied producers warned that markets will probably be oversupplied in 2019. U.S. stockpiles expanded to the highest level since December 2017 last week and oil producers there are producing at the highest rate since at least March 1983, according to government data.

While indicating that Saudi Arabia is producing at record levels, Al-Falih said the world’s biggest exporter won’t oversupply the market. Demand for Saudi crude may be lower in January compared with December, he told reporters on Thursday.

–With assistance from Sharon Cho.

To contact the reporter on this story:
Grant Smith in London at gsmith52@bloomberg.net

To contact the editors responsible for this story:
Pratish Narayanan at pnarayanan9@bloomberg.net
Rakteem Katakey, Amanda Jordan