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Oil falls to one-week low as US supply seen adding to surplus

[MELBOURNE] Oil declined to a one-week low in New York on estimates that US crude inventories increased from a record level.

West Texas Intermediate futures slid as much as 4.6 per cent. Crude supplies probably rose by 3 million barrels to 420.9 million through Feb 13, according to a Bloomberg survey before a report from the Energy Information Administration Thursday. That would be the highest in weekly records compiled by the EIA since August 1982. Industry data Wednesday showed inventories climbed by 14.3 million barrels, according to reports on Twitter.

The fastest US crude production in three decades helped trigger a global glut that pushed oil prices almost 50 per cent lower in 2014. Energy explorers are paring drilling rates and investment in response to the slump, with Marathon Oil Corp. announcing on Wednesday it will cut an additional 20 per cent from its spending plan for this year.

"The market is signaling an oversupply of crude that can only lead to lower prices," Christopher Bellew, senior broker at Jefferies International Ltd. in London, said by e-mail. "All the fundamentals, barring the decline in the US rig count, suggest that non-Opec output will not start to fall until the third quarter."

West Texas Intermediate for March delivery dropped as much as US$2.41 to US$49.73 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Feb 12. The contract was at US$50.01 at 11:19 am London time. The volume of all futures traded was about 35 per cent above the 100-day average for the time of day.

Brent for April settlement fell US$1.52, or 2.5 per cent, to US$59.01 a barrel on the London-based ICE Futures Europe exchange. It declined US$2, or 3.2 per cent, to US$60.53 on Wednesday. The European benchmark crude traded at a premium of US$8.24 to WTI for the same month.

US crude stockpiles have surged above the five-year average for this time of the year, according to EIA data. Production climbed to 9.23 million barrels a day through Feb 6, the highest in weekly data compiled since January 1983 by the EIA, the Energy Department's statistical arm.

Supplies at Cushing, Oklahoma, the delivery point for WTI, rose by 3.1 million barrels last week, the American Petroleum Institute reported Wednesday. The industry-funded API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.

An explosion at an Exxon Mobil Corp oil refinery is threatening to boost retail gasoline prices in Los Angeles that are already within cents of US$3 a gallon.

Prices at Los Angeles pumps gained 2 cents to average US$2.88 a gallon on Wednesday, according to the Automobile Club of Southern California. That was before the blast at the Exxon Torrance refinery, which shut two gasoline-producing units, according to two people familiar with the situation who asked not to be identified because the information isn't public.