Oil extends decline as U.S. crude supplies seen expanding glut

 05 Apr 2016 - 9:31

Oil extends decline as U.S. crude supplies seen expanding glut
Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that has hammered prices, in Cushing, Oklahoma, March 24, 2016. Picture taken March 24, 2016. REUTERS/Nick Oxford


Ben Sharples

Oil extended declines from a one-month low before U.S. government data forecast to show increasing crude stockpiles kept supplies at the highest level in more than eight decades.

Futures decreased as much as 1.2 percent in New York after falling 6.9 percent the past two sessions. Inventories climbed by 2.85 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. That will be an eighth weekly advance. Oil-producing countries are discussing a draft resolution for the Doha meeting on freezing output, Russian Energy Minister Alexander Novak told reporters.

Oil’s rebound from a 12-year low this year has stalled amid doubts about the prospects of a proposed deal to freeze supply. Saudi Arabia will only cap production if Iran, pumping at the fastest rate in almost four years, and other major producers do so, the kingdom’s deputy crown prince said Friday. Russia and all OPEC members except Libya will attend the April 17 meeting.

“While we have high levels of crude inventory, it’s very difficult for oil to make a sustained move higher,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “The momentum has been negative since the Saudi comments.”

West Texas Intermediate for May delivery dropped as much as 43 cents to $35.27 a barrel on the New York Mercantile Exchange and was at $35.53 at 1:33 p.m. Hong Kong time. The contract fell $1.09 to $35.70 a barrel on Monday, the lowest close since March 3. Total volume traded was about 29 percent below the 100-day average.

U.S. Stockpiles

Brent for June settlement was 15 cents lower at $37.54 a barrel on the London-based ICE Futures Europe exchange after falling as much as 0.9 percent earlier. The front-month contract slid 2.5 percent to settle at $37.69 on Monday, also the lowest since March 3. The global benchmark was at a premium of 68 cents to WTI for June.

Gasoline stockpiles probably fell by 1.1 million barrels last week, according to the Bloomberg survey. That will be a seventh week of declines. U.S. crude inventories expanded to 534.8 million barrels through March 25, according to data from the EIA.

Gasoline demand and output freeze news:

U.S. demand for finished motor gasoline in January dropped to 8.7 million barrels a day, the first year-on-year decline since November 2014, according to data from the EIA’s Petroleum Supply Monthly report.
Russia may discuss with Saudi officials the kingdom’s statement made last week that it will only freeze output if Iran and others do so, Russia’s Novak said.