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Oil resumes decline as rebound on Fed fizzles amid record supply
[MELBOURNE] Oil resumed its slump after rallying from the lowest price in six years as focus returned to record supply in the US, the world's biggest consumer.
Futures fell as much as 1.5 per cent in New York after snapping a six-day losing streak on Wednesday.
Crude stockpiles and production expanded further last week from the highest levels in more than 30 years, Energy Information Administration data showed. Prices had surged 2.8 per cent after the Federal Reserve cut its estimates for interest rates, weakening the dollar and bolstering the investment appeal of commodities.
Crude has slid almost 18 per cent from this year's peak in February as US supply continues to increase, even as drillers idled the number of active rigs to the fewest since 2011.
Saudi Arabia, Opec's largest producer, won't interfere in the market, according to Prince Turki Al-Faisal, a former intelligence chief of the kingdom.
"We'd expect more volatility and downside because the supply story hasn't changed," David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. "We now know what the Fed target is so we'll now focus on the oil market and it's not looking great."
West Texas Intermediate for April delivery dropped as much as 65 cents to US$44.01 a barrel in electronic trading on the New York Mercantile Exchange and was at US$44.14 at 12.53pm Sydney time.
The contract rose US$1.20 to US$44.66 on Wednesday. The volume of all futures traded was 23 per cent below the 100-day average.
Brent for May settlement was 22 cents lower at US$55.69 a barrel on the London-based ICE Futures Europe exchange. It advanced US$2.40 to US$55.91 on Wednesday. The European benchmark crude traded at a premium of US$9.52 to WTI for the same month.
US crude stockpiles expanded 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 climbed by 53,000 barrels a day to 9.42 million a day, the fastest rate since at least January 1983.
Inventories at Cushing, Oklahoma, the delivery point for WTI contracts, gained 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 amid a shale boom.
The Bloomberg Dollar Spot Index, a gauge of the currency's performance against 10 major peers, declined 1.8 per cent after Fed officials cut their projections for the federal funds rate.
The Federal Open Market Committee reduced its median estimate for the federal funds rate for end-2015 to 0.625 per cent, compared with 1.125 per cent in December forecasts. The 2016 estimate decreased to 1.875 per cent from 2.5 percent, according to its quarterly Summary of Economic Projections.
Inaction by the Organisation 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.
Opec, whose 12 members produce about 40 per cent of the world's oil, decided at a Nov 27 meeting to maintain its collective output at 30 million barrels a day. The group has pumped above that target the past nine months, a Bloomberg survey showed.
Saudi Arabia will maintain the same policy stance taken in November, Al-Faisal said at a conference in London on Wednesday. The group is scheduled to meet again on June 5.