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Update: Oil slumps to six-year low as US production seen filling tanks
[MELBOURNE] Oil extended its collapse to the lowest intraday price since March 2009 on speculation that record US supply may start to strain the country's storage capacity.
Crude tanks in the US may fill up as drilling-rig cuts fail to slow production this year, the International Energy Agency predicted. Speculators have cut bullish bets on oil to the lowest level in more than two years while short wagers rise to a record, US Commodity Futures Trading Commission data show. Futures lost as much as 2.8 per cent to US$43.57 a barrel in New York on Monday, falling a fifth day.
Oil slumped for a fourth week on Friday after government data showed US output and stockpiles expanded to the highest levels in more than three decades, exacerbating a glut that drove prices almost 50 per cent lower last year. The market hasn't bottomed yet because of the surplus, former Federal Reserve Chairman Alan Greenspan said on Bloomberg Television.
"We've got this ongoing increase in inventory with no cut in production, despite the drop in the number of shale-oil rigs," Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. "We're seeing downside momentum now develop in the market."
West Texas Intermediate for April delivery was down 42 cents, or 0.9 per cent, at US$44.42 a barrel in electronic trading on the New York Mercantile Exchange at 3:56 pm Singapore time. The contract fell US$2.21 to US$44.84 on Friday, capping a 9.6 per cent loss for the week, the most since December. The volume of all futures traded was about 45 per cent above the 100-day average. Prices have decreased 17 per cent this year.
US Supply Brent for April settlement, which expires on Monday, slid as much as US$1.34, or 2.5 per cent, to US$53.33 a barrel on the London- based ICE Futures Europe exchange. The European benchmark crude traded at a premium of US$10.05 to WTI. The more active Brent contract for May was 54 cents lower at US$54.47.
Global spare oil-storage capacity is "not as tight as we thought previously" and there's about 377 million barrels of onshore storage space left, according to Societe Generale SA. US crude tanks are 63 per cent full, Michael Wittner, the head of oil market research in New York, said in an e-mailed report dated March 14.
US oil production will expand this year by about 750,000 barrels a day to 12.56 million a day, the IEA said in a report on Friday. That's up from an estimate of 12.41 million in last month's report. The Paris-based agency, an adviser to developed economies, boosted its projection for North American output including natural gas liquids and condensate in the fourth quarter of 2014 by 300,000 barrels a day.
"The trend is still weak and there will still be downward pressure from the market's oversupply," said Takashi Hayashida, the chief executive officer of Elements Capital Inc, a Tokyo- based hedge fund that focuses on energy and commodities.
Crude stockpiles in the US, the world's biggest oil consumer, rose to 448.9 million barrels through March 6, according to the Energy Information Administration. That's the highest level in weekly records dating back to August 1982. The nation pumped 9.37 million a day, the most since January 1983.
Rigs targeting oil in the US shrank by 56 to 866 last week, the fewest since March 2011, said Baker Hughes Inc. Companies have idled 709 machines since the start of December, a 45 per cent decline, according to the services company.
Low oil prices are hurting all producers including Saudi Arabia, which "has never been in a price war with anybody," according to Ibrahim Al-Muhanna, an adviser to Saudi Oil Minister Ali al-Naimi. Prices have stabilized at about US$60 a barrel based on fundamental market forces, he said at a conference in Doha, Qatar.
Saudi Arabia led the Organization of Petroleum Exporting Countries in resisting calls to cut output at a meeting in November. The 12-member group, which supplies about 40 per cent of the world's oil, is scheduled to gather on June 5.
Hedge funds and other money managers reduced their net-long position on WTI by 2.5 per cent in the seven days ended March 10, according to the CFTC.