Crude falls in front of supply number

January 28, 2015 10:30 AM

Oil fell in New York as traders anticipated the government will announce that U.S. crude inventories rose to the highest level since 1982.

West Texas Intermediate futures dropped as much as 2.4%. Crude stockpiles probably expanded for a third week, a Bloomberg News survey showed before an Energy Information Administration report on Wednesday. Barclays Plc cut its 2015 forecast for Brent crude by 39% as U.S. production looks set to withstand the collapse in prices.

Oil slid almost 50% last year as the U.S. pumped at the fastest pace in more than three decades while the Organization of Petroleum Exporting Countries resisted calls to cut supply. Saudi Arabian Oil Co.’s Chief Executive Officer Khalid Al-Falih reiterated government policy that the kingdom won’t balance global crude markets “singlehandedly.”

“Crude oil stocks in the U.S. still appear to be growing incessantly,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report. “Prices are only likely to recover in any lasting fashion when U.S. oil production begins to decrease in the second half of the year.”

Futures Retreat

West Texas Intermediate for March delivery decreased as much as $1.09 to $45.14 a barrel in electronic trading on the New York Mercantile Exchange and was at $45.26 at 1:20 p.m. London time. The contract climbed $1.08 to $46.23 on Tuesday, the first gain in four days and the highest settlement since Jan. 22. The volume of all futures traded was about 18% below the 100-day average for the time of day.

Brent for March settlement lost as much as 81¢, or 1.6%, to $48.79 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of as much as $3.95 to WTI, the most since Jan. 2.

Crude inventories in the U.S., the world’s biggest oil consumer, probably increased by 3.85 million barrels to 401.7 million in the week ended Jan. 23, according to the median estimate in the Bloomberg survey of 10 analysts. That would be the highest level in records compiled since August 1982 by the EIA, the Energy Department’s statistical arm.

Stockpiles rose by 12.7 million barrels last week, the industry-funded American Petroleum Institute in Washington said on Tuesday, based on reports on Twitter.

Saudi Strategy

Saudi Arabia will maintain its current policy, refusing to pare output and bolster prices alone, even as prices fall to levels “too low for everybody,” Saudi Aramco’s Al-Falih said at a conference in Riyadh. The world’s biggest oil exporter led OPEC’s Nov. 27 decision to maintain output levels.

“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” Al-Falih said. “Saudi Arabia will not singlehandedly balance the market in a downturn.”

Brent and WTI will continue to drop for the next few months, slipping below $40 a barrel, Barclays analysts Miswin Mahesh and Michael Cohen said in a report. The bank cut its 2015 Brent forecast to $44 a barrel from $72.

Chinese oil demand is forecast to expand by 3% to 534 million metric tons this year, China National Petroleum Corp., the country’s largest oil and gas producer, said in an annual research report.

That’s about 10.7 million barrels a day, or about 11% of global demand, based on International Energy Agency estimates.

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