Oil prices have further to drop with few signs of slowing production in the US, according to a global energy agency.
The International Energy Agency (IEA), a watchdog group based in Paris that represents the world’s main oil-importing nations, said in its monthly report on Friday that the recent stabilization in oil prices is “precarious.”
“Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course,” it said.
That might be playing out right now. Oil prices tumbled 10 percent this week, including a 5 percent drop on Friday.
The IEA cautioned that the dangers of oil supply disruptions are growing. Low prices could raise the risk of social disruption in some countries dependent on oil, the agency said, and the ongoing conflicts in Iraq and Libya have not been resolved.
Drillers are cutting back on spending and taking production offline because of plunging prices.
On Friday, oilfield services company Baker Hughes Inc said that the number of rigs exploring for oil and natural gas in the US fell by another 67 this week to 1,125. More than half the rigs taken off-line were in Texas.
That has not stemmed the glut of oil that is now nearing full capacity at US storage sites.
The US supply of oil has reached levels not seen in at least 80 years, according to the US Department of Energy.
The growth in stored oil might be slowed this spring as refineries idled for maintenance start production again, but it would not stop it, according to the IEA report issued on Friday.
That is setting oil and gasoline prices up for another steep fall.
The price of oil fell US$2.21 on Friday to close at US$44.84 per barrel in New York. Prices were more than double that at this time last year.
Meanwhile, the US government wants to buy up to 5 million barrels of crude to store in its strategic reserve on the Gulf of Mexico coast.
The Department of Energy wants the crude delivered to its Bryan Mound storage cavern near Freeport, Texas, in June or July, according to a pre-solicitation notice posted on federal Web sites on Friday. The purchase follows a 5 million barrel test sale last spring, when oil prices were nearly double what they are now.
The US Strategic Petroleum Reserve purchase comes as booming shale oil production has pushed private oil inventories in the US to 449 million barrels, the most in records dating back to 1982.
The reserve has 691 million barrels and 36 million barrels of empty space.
The purchase would be the first for the reserve since it reached its peak inventory level of about 727 million barrels in December 2009. It released 31 million barrels in 2011 to help offset supply disruptions caused by upheaval in the Middle East and North Africa, and exchanged 1 million with Marathon Petroleum Corp after Hurricane Isaac blocked tankers from delivering crude to the company’s Garyville refinery in Louisiana.
Additional reporting by Bloomberg
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