The price of crude oil fell to its lowest level in almost six years yesterday as signs that Saudi Arabia’s new king would maintain its production policy and rising US crude stockpiles bolstered speculation that a global glut will persist.
Futures dropped as much as 2.7 percent in New York trading, extending a 6.4 percent slide last week.
King Salman bin Abdulaziz Al Saud, who took over after the death of King Abdullah on Friday last week, pledged to maintain the policies of his predecessor in a speech on Saudi national television.
US oil inventories climbed to 383.5 million barrels last month, the highest level for December since 1930, the American Petroleum Institute reported.
Oil slumped almost 50 percent last year as OPEC resisted calls to cut output, even as the US pumped at its fastest pace in more than three decades.
Saudi Arabia, the world’s biggest exporter, has chosen not to reduce supply and count instead on lower prices to stimulate demand, according to Mohammad Al Sabban, an adviser to the kingdom’s petroleum minister from 1988 to 2013.
“Crude production needs to slow down first to decelerate the speed of stockpiling, which is seen to be even faster than during the 2008 financial crisis,” Hong Sung-ki, a commodities analyst at Samsung Futures Inc in Seoul, said by telephone. “With Saudi Arabia, the market hardly reacted last week and will remain unchanged as King Salman is known to be very conservative.”
West Texas Intermediate for March delivery decreased as much as US$1.24 to US$44.35 a barrel in electronic trading on the New York Mercantile Exchange and was at US$44.76 at 3:45pm in Singapore.
The contract lost US$0.72 to US$45.59 on Friday last week, the lowest close since March 2009. The volume of all futures traded was almost double the 100-day average.
Brent crude for March settlement slid as much as US$0.94, or 1.9 percent, to US$47.85 a barrel on the London-based ICE Futures Europe exchange. It gained US$0.27 to US$48.79 on Friday. The European benchmark crude traded at a premium of US$3.19 to West Texas intermediate.
Crude inventories in the US, the world’s largest oil consumer, increased 7.4 percent last month from a year ago, the American Petroleum Institute in Washington said in a monthly report on Friday last week. Production accelerated 16 percent to 9.12 million barrels a day, the highest level for any month since February 1986, the group said.
The US’ oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.
Crude stockpiles in China, the world’s second-biggest oil consumer, expanded almost 9 percent last year to an estimated 33.37 million tonnes, a Xinhua news agency newsletter said. That is about 244.6 million barrels.
Saudi Arabia, OPEC’s largest producer, led the group’s strategy of maintaining production levels amid the market collapse. While smaller members, including Venezuela, called for action to prop up prices, Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi highlighted the need to preserve market share.
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