[NEW YORK] The price of crude oil hasn't reached a bottom yet as production keeps increasing, former Federal Reserve Chairman Alan Greenspan said.
The slump in oil prices hasn't curtailed output, and there is a huge amount bottled up in the US, Mr Greenspan said in an interview with Bloomberg Television on Friday. Inventories at Cushing, Oklahoma, the delivery point for US benchmark futures, will keep rising, he said.
"We are probably at the point now, where at the current rate of fill, we are going to run out of room in Cushing by next month," he said. "Until we find a way to get out of this dilemma, prices will continue to ease because there's no place for that oil to go except into the markets."
West Texas Intermediate futures dropped 1.9 per cent to US$46.17 a barrel as of 9:31 am Friday on the New York Mercantile Exchange. Prices are down almost 60 per cent from their June peak.
US crude stockpiles increased for nine weeks through March 6 to 448.9 million barrels, the highest in Energy Information Administration records dating back to August 1982. The nation pumped 9.37 million a day last week, the fastest pace in weekly estimates compiled by the Energy Department's statistical arm since 1983.
Stockpiles at Cushing rose by 2.32 million barrels to 51.5 million last week, the highest level since January 2013. Cushing has a working capacity of 70.8 million barrels, according to the EIA.
The surplus may soon strain US storage capacity, renewing a slump in prices and curbing its output, the International Energy Agency said in a monthly market report on Friday. The IEA boosted estimates for US oil production this year as cutbacks in drilling rigs have so far failed to slow output.
Drillers have idled 653 rigs since the start of December, data from Baker Hughes Inc show. The number of active machines seeking oil was 922 as of March 6, the lowest since April 2011, the services company said.
"The rigs that have been closing down have not been affecting the capacity to produce crude," Mr Greenspan said. "You are getting the inefficient rigs shutting down, but the capacity to basically build oil expansion remains there."