A man takes a nosil at a gas station on Dec. 26, 2014 in Marseille, southeastern France. Oil prices have fallen about 50 per cent since June on mounting supplies due to increased production and lackluster global economic growth.BORIS HORVAT/AFP / Getty Images
Oil traded near the lowest level since 2009 amid speculation that U.S. crude inventories will stay at the highest for the time of year in at least three decades.
West Texas Intermediate fell as much as 1.7 per cent in New York before paring losses while Brent slid 1 per cent in London. U.S. stockpiles are projected to have climbed 900,000 barrels to 388.1 million barrels last week, the highest for the period in data going back to 1982, a Bloomberg News survey shows before a report tomorrow. U.S. oil drillers last week idled the most rigs since 2012, Baker Hughes Inc. said yesterday.
Oil has slumped 46 per cent this year, set for the biggest annual decline since 2008, as the highest U.S. production in more than three decades contributed to a global surplus estimated by Qatar at 2 million barrels a day. Saudi Arabia, which is steering the Organization of Petroleum Exporting Countries to resist cutting output, has said it's confident that prices will rebound as economic growth boosts demand.
"All this North American oil has really changed the tone of the market," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Conn. "We have a global surplus of oil. The factors that have been weighing on the market for the past few months are still the dominant features."
WTI for February delivery was down 8 cents at $53.53 (U.S.) at 12:05 p.m. on the New York Mercantile Exchange after earlier falling as far as $52.70, the lowest since May, 2009. The volume of all futures traded was about 40 per cent below the 100-day average for the time of day.
Libya, Dollar
Brent for February settlement fell 56 cents, or 1 per cent, to $57.32 a barrel on the London-based ICE Futures Europe exchange after reaching $56.74, also the lowest since May, 2009. Volume was 34 per cent below the 100-day average. The European benchmark crude traded at a premium of $3.79 to WTI on the ICE.
Prices briefly rebounded as Libyan production declined amid militant attacks and the dollar dropped, boosting the investment appeal of oil.
Libyan output has fallen below 300,000 barrels a day, the lowest since May, after militants shifted attacks to energy facilities including the country's largest oil export terminal, according to Energy Aspects Ltd. estimates. The Bloomberg Dollar Spot Index slid as much as 0.5 per cent.
The market rebounded "on the ongoing concerns about Libya and the fact that the dollar is showing some signs of weakness," said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Crude Inventories
U.S. crude inventories have risen to almost 13 per cent above the five-year average level of 343.1 million barrels for this time of year, Energy Information Administration data showed. Supplies of gasoline and distillate, including diesel and heating oil, were expected to increase, according to the Bloomberg survey. The EIA, the Energy Department's statistical, will release its weekly report tomorrow.
"Nowhere are signs of a rising crude glut more visible right now than in the U.S.," David Wech, an analyst at consultants JBC Energy GmbH, said in a report.
U.S. domestic production expanded to 9.14 million barrels a day through Dec. 12, the most in weekly data that started in January 1983, according to the EIA.
The slide in oil prices has contributed to the steepest annual drop in the ruble since 1998, given crude is Russia's main export earner. OPEC has so far resisted calls from cash- strapped Venezuela to act and stem the rout.
Flooding Market
U.S. production from fracking is flooding the market, Venezuela President Nicolas Maduro said in a speech broadcast on state television yesterday. The South American country had called for an output cut at OPEC's Nov. 27 meeting in Vienna.
OPEC, which supplies about 40 per cent of the world's oil, pumped 30.56 million barrels a day in November, according to data compiled by Bloomberg. That exceeded its collective target of 30 million for a sixth straight month.
U.S. production growth may slow next year as companies reduce spending and drilling, said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas.
U.S. rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, the lowest since April, Baker Hughes said on its website yesterday, extending the three-week decline to 76.
"By midyear we should see production growth slowing," Williams said.