Oil capped the biggest weekly loss since November last year after surging US supplies erased three months of gains that followed OPEC’s deal to cut output.
US crude stockpiles have expanded to a record for four straight weeks and output has climbed to the highest level in more than a year, government data showed on Wednesday.
Declines accelerated on Friday after a report showed US oil drilling rose for an eighth straight week.
US crude stockpiles inventories last week rose by 8.2 million barrels to 528.4 million, the highest level in weekly data compiled by the Energy Information Administration (EIA) since 1982.
Output advanced for a third week to 9.09 million barrels per day, the most since February last year, the EIA reported on Wednesday.
“The market is still digesting this week’s high inventory number,” Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at US Bank, which oversees US$136 billion in assets, said by telephone. “The shock number had the market test the US$50 band and then break through. The next two weeks should be volatile, with prices potentially falling to the US$45 level.”
West Texas Intermediate (WTI) for April delivery on Friday fell US$0.79, or 1.6 percent, to US$48.49 per barrel on the New York Mercantile Exchange. The contract lost 9 percent from last week’s US$53.33 per barrel. Total volume traded was 29 percent above the 100-day average.
Brent for May settlement declined US$0.82, or 1.6 percent, to US$51.37 per barrel on the ICE Futures Europe exchange in London.
It was also the lowest close since late November last year. The contract is down 8 percent from last week’s US$55.90. Brent ended the session at a US$2.34 premium to May WTI.
US oil rig count rose by eight to 617 this week, the highest since September 2015, according to Baker Hughes Inc data.
“The break of the band yesterday is a sign that the market was overbought,” Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone.
Oil market news:
‧ Oil output in the Permian Basin, which straddles the Texas-New Mexico border, will rise by 600,000 to 700,000 barrels per day in the year through December and “a lot of that” will be exported, Mike Loya, the head of Vitol in the Americas, said in an interview.
‧ BP PLC’s shares surged the most this year after a London newspaper reported on rumors that Exxon Mobil Corp sounded out major shareholders over a potential takeover.
‧ Implied volatility is climbing, typically an indicator that investors believe prices are set to fall and risk perception is worsening.
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