Oil holds near $50 as investors await US crude stockpiles data

[MELBOURNE] Oil traded near USUS$50 a barrel as investors await US government data that will signal the pace of supply growth in the world's biggest consumer.

Stockpiles probably expanded by 3.95 million barrels last week, increasing from a record high, according to a Bloomberg News survey before an Energy Information Administration report Wednesday. They climbed over the prior seven weeks to 434.1 million, the most in data compiled by the EIA starting August 1982. Futures advanced as much as 1.2 per cent in New York.

Prices have dropped 6.3 per cent this year after plunging almost 50 per cent in 2014 as global supply outpaces demand amid increased US output. Data on Monday showed US manufacturing expanded at a slower pace in February as weaker overseas growth limited orders. Central banks outside the US are boosting stimulus to revive their economies, with the euro area's asset- purchase program set to begin as early as this week.

"The fundamental picture still has questions about how much supply is coming on," Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. "There is mixed economic data from the US but overall the confidence is there, compared with what's happening in Europe. That's created a balanced environment for oil."

West Texas Intermediate for April delivery rose as much as 58 cents to US$50.17 a barrel in electronic trading on the New York Mercantile Exchange and was at US$49.95 at 3:48 pm Singapore time. The contract slid 17 cents to US$49.59 on Monday. The volume of all futures traded was about 48 per cent below the 100-day average.

Brent for April settlement was 53 cents higher at US$60.07 a barrel on the London-based ICE Futures Europe exchange. The contract fell US$3.04, or 4.9 per cent, to US$59.54 on Monday. The European benchmark crude was at a premium of US$10.10 to WTI. It closed at US$12.82 on Feb 27, the widest gap since January 2014.

US crude stockpiles have surged above the five-year average level for this time of the year, according to the EIA. Supplies probably increased to 438 million through Feb 27, the median estimate of six analysts surveyed by Bloomberg showed.

The nation's oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota. The US pumped 9.29 million barrels a day through Feb 20, the highest level in weekly data from the Energy Department's statistical arm since January 1983.

WTI may fall as low as US$32 a barrel because support from heating-oil demand will fade as winter ends, Bank of America Corp said in a note on Monday. Prices climbed in February for the first monthly gain since June amid unseasonably cold weather even as US crude stockpiles and production rose to records.

BLOOMBERG