Inventories highest in 30 years, 17% over 5-year average
LONDON: New York oil prices tumbled to a near six-year low underneath $44 per barrel on Thursday (Friday in Manila), as record-high US crude inventories deepened worries over the global supply glut.
West Texas Intermediate (WTI) for March delivery dived to $43.57 a barrel, a level last seen on March 12, 2009.
The contract later stood at $43.87, down 58 cents from Wednesday’s close.
European benchmark Brent North Sea crude for March meanwhile rose nine cents to stand at $48.56 a barrel in London late afternoon deals.
“WTI . . . extended losses below $44 per barrel, showing the potential for a possible test of the $40 key level in the upcoming trading sessions if the sharp downside momentum continues,” said Sucden analyst Myrto Sokou.
Crude futures also fell sharply Wednesday after official data showed US crude stockpiles surged by 8.9 million barrels to 406.7 million in the week to January 23.
The overall level of stockpiles was the highest since the US government began keeping weekly records in 1982.
Sokou added that the weekly US energy report “indicated a prolonged deterioration in oil fundamentals” of supply and demand.
In reaction to the US inventories data, WTI dropped $1.78 in New York while Brent fell $1.13 in London on Wednesday.
“Crude oil stocks now find themselves at their highest level since the data series began more than 30 years ago and are 17 percent above the five-year average,” added Commerzbank analysts.
“The lion’s share of the inventory build took place on the US Gulf Coast, where the biggest storage capacities are to be found. Crude oil stocks at Cushing also grew by a significant two million barrels, meaning that the inventory build there has totalled a good eight million barrels since the beginning of the year.”
Daniel Ang, investment analyst at Phillip Futures in Singapore, added that the stockpiles surge came as “no surprise” as refinery utilization rates in the world’s top crude consumer have been low.
However, “what is really shocking is that US production still continues to increase despite low crude prices,” Ang said.
“Without a drop in US crude production, it is going to be an uphill battle for oil bulls,” he added.
The oil market has lost more than half its value since June last year when crude was sitting at more than $100 a barrel due to a supply glut, boosted largely by robust US shale oil production, and weak global demand.
The problem was exacerbated in November after the OPEC oil cartel insisted that it would maintain output levels despite plunging prices. The 12-nation group pumps about 30 percent of global crude.