Oil traded near the lowest close in two weeks in New York after government data showed U.S. crude stockpiles expanded, adding to a global surplus.
West Texas Intermediate gained 0.8 per cent after declining 3.7 per cent in the last two days. Crude inventories increased by 4.51 million barrels to 448.9 million through March 6, the highest level in weekly data compiled since August 1982, the Energy Information Administration reported on Wednesday. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, increased for a 14th week.
Rising U.S. supplies from shale formations in Texas and North Dakota are contributing to a global glut that drove prices down by almost half in 2014. The nation's output continues to climb, even as drillers cut the number of active rigs to a four– year low. The oil market is oversupplied by 1 million to 1.5 million barrels a day, according to an official from Oman.
"U.S. stockpiles once again showed a strong increase this time," Ole Hansen, head of commodity strategy at Copenhagen– based Saxo Bank A/S, said by phone. The build at Cushing "continues to attract some attention because there is obviously some speculation about whether tank capacity can be reached in the U.S."
West Texas Intermediate for April delivery gained 37 cents to $48.54 a barrel in electronic trading on the New York Mercantile Exchange at 10:16 a.m. London time. The contract fell 12 cents to $48.17 on Wednesday, the lowest close since Feb. 26. The volume of all futures traded was about 21 per cent below the 100-day average for the time of day. Prices have decreased 9 per cent this year.
Brent for April settlement rose 77 cents to $58.31 a barrel on the London-based ICE Futures Europe exchange. It gained $1.15 to $57.54 on Wednesday. The European benchmark crude's premium to WTI expanded to as much as $9.79 a barrel, the widest since March 9.
Crude inventories in the U.S., the world's largest oil consumer, are about 25 per cent above the five-year average for this time of the year as output surged to a record. The nation pumped 9.37 million barrels a day last week, the highest in EIA data going back to January 1983.
Stockpiles at Cushing, Oklahoma, the biggest U.S. oil– storage hub and the delivery point for WTI contracts, rose by 2.32 million barrels to 51.5 million, according to the Energy Department's statistical arm. That's the highest level since January 2013.
Drillers in the U.S. have idled 653 rigs since the start of December, data from Baker Hughes Inc. show. The number of active machines seeking oil was 922 as of March 6, the lowest since April 2011, the services company said.
The global surplus comes not only from U.S. supply but also other countries boosting output, said Salim Al Aufi, Oman's oil and gas undersecretary. Oman, along with Organization of Petroleum Exporting Countries members Saudi Arabia and the United Arab Emirates, have all increased production, he said Thursday at a forum in Muscat. Oman is the biggest non-OPEC producer in the Middle East.
"The reasoning for OPEC not wanting to cut is that they want other non-OPEC producers to share the burden of reducing supply," Saxo Bank's Hansen said. "And so far we haven't seen that. OPEC is still adding oil to an oversupplied market."