File photo of a tanker truck passing a Valero Energy Corp. refinery in Corpus Christi, Tex.Eddie Seal/Bloomberg
Oil resumed its slump as focus returned to record supply in the U.S., the world's biggest consumer.
Futures fell as much as 4.2 per cent in New York after gaining the most in more than 2 weeks on Wednesday as the U.S. Federal Reserve cut its estimates for interest rates, reducing the value of the dollar and bolstering the investment appeal of commodities. Crude stockpiles and production expanded further last week from the highest levels in more than 30 years, Energy Information Administration data showed.
Crude has slid 21 per cent since the start of February as U.S. supply increased, even as the number of active oil rigs dropped to the lowest since 2011. OPEC will maintain its production to keep market share, Kuwait Oil Minister Ali Al– Omair said. Saudi Arabia, the group's largest producer, won't interfere in the market, according to Prince Turki Al-Faisal, a former intelligence chief of the kingdom.
"We did see a continued, very solid increase in U.S. inventories," Bjarne Schieldrop, chief commodities analyst at SEB AB, Sweden's fourth-biggest bank, said by phone from Oslo. "That's overall very bearish for U.S. oil and that's dragging down European crude with it."
West Texas Intermediate for April delivery dropped as much as $1.86 to $42.80 a barrel in electronic trading on the New York Mercantile Exchange and was at $42.66 at 12:18 p.m. London time. The contract, which expires on Friday, rose $1.20 to $44.66 on Wednesday, the most since Feb. 27. The more-active May contract slid $1.55 to $45.10. Total volume was about 11 per cent below the 100-day average for the time of day.
Crude Supplies
Brent for May settlement fell as much as $1.26 a barrel, or 2.3 per cent, to $54.65 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $9.60 to WTI for the same month.
U.S. crude stockpiles gained by 9.62 million barrels to 458.5 million through March 13, according to the EIA. That's the highest level in weekly records from the Energy Department's statistical arm dating back to August 1982. Output accelerated by 53,000 barrels a day to 9.42 million a day, the fastest pace since at least January 1983.
Inventories at Cushing, Oklahoma, the delivery point for WTI contracts, climbed by 2.87 million barrels to 54.4 million, the highest level since April 2004, the report showed. Stockpiles at the nation's biggest oil-storage hub have surged by almost 70 per cent this year.
OPEC Policy
Futures closed 2.8 per cent higher on Wednesday in New York after the Fed indicated that it will raise rates more slowly than it previously predicted, pushing the Bloomberg Dollar Spot Index down 1.8 per cent to 1,194.89, the biggest drop since March 2009. The index, a gauge of the currency's performance against 10 major peers, rebounded to 1,207.89 at 12:21 p.m. in London.
Inaction by the Organization of Petroleum Exporting Countries has driven crude prices lower and producers elsewhere should cut supply, said Iranian Oil Minister Bijan Namdar Zanganeh, according to state news agency IRNA. Iran could add a million barrels to daily oil production if sanctions were lifted, Zanganeh said this week.
OPEC, whose 12 members produce about 40 per cent of the world's oil, decided at a Nov. 27 meeting to keep its collective output unchanged at 30 million barrels a day. The group has pumped above that target the past nine months, a Bloomberg survey showed.
If other producers want to cut supply, "we will be very happy," al-Omair said Thursday in Kuwait City. No "serious" requests have come from OPEC members to hold early talks so "accordingly the next meeting will be in June," he said.
Saudi Arabia will maintain the same policy stance taken in November, Al-Faisal said at a conference in London on Wednesday. OPEC is scheduled to meet June 5 in Vienna.