Tue, Mar 17, 2015 - Page 15 News List

Oil prices slump on concern over US storage limits

SUPPLY GLUT:Ex-Fed chairman Alan Greenspan said that prices have yet to bottom out because of the surplus, as US output and stockpiles hit 30-year highs


Oil extended its collapse to the lowest intraday price since March 2009 on speculation that record US supply might start to strain the country’s storage capacity.

Crude tanks in the US might fill up as drilling-rig cuts fail to slow production this year, the International Energy Agency predicted.

Speculators have cut bullish bets on oil to the lowest level in more than two years, while short wagers rise to a record, US Commodity Futures Trading Commission data show.

Futures lost as much as 2.8 percent to US$43.57 per barrel in New York yesterday, falling a fifth day.

Oil slumped for a fourth week on Friday after government data showed US output and stockpiles expanded to the highest levels in more than three decades, exacerbating a glut that drove prices almost 50 percent lower last year.

The market has not bottomed yet because of the surplus, former US Federal Reserve chairman Alan Greenspan said on Bloomberg Television.

“We’ve got this ongoing increase in inventory with no cut in production, despite the drop in the number of shale-oil rigs,” CMC Markets Sydney-based chief strategist Ric Spooner said by telephone. “We’re seeing downside momentum now develop in the market.”

West Texas Intermediate for delivery next month was down US$0.42, or 0.9 percent, at US$44.42 per barrel in electronic trading on the New York Mercantile Exchange at 3:56pm Singapore time. The contract fell US$2.21 to US$44.84 on Friday, capping a 9.6 percent loss for the week, the most since December last year. The volume of all futures traded was about 45 percent above the 100-day average. Prices have decreased 17 percent this year.

Brent for April settlement, which expired yesterday, slid by as much as US$1.34, or 2.5 percent, to US$53.33 per barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of US$10.05 to WTI. The more active Brent contract for May was US$0.54 lower at US$54.47.

Global spare oil-storage capacity is “not as tight as we thought previously” and there are about 377 million barrels of onshore storage space left, according to Societe Generale SA.

US crude tanks are 63 percent full, Michael Wittner, the head of oil market research in New York, said in an e-mailed report dated Friday.

US oil production is expected to expand this year by about 750,000 barrels per day to 12.56 million per day, the energy agency said in a report on Friday. That is up from an estimate of 12.41 million in last month’s report.

The Paris-based agency, an adviser to developed economies, boosted its projection for North American output including natural gas liquids and condensate in the fourth quarter of last year by 300,000 barrels per day.

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