Oil price back at six-year low as US production seen filling tanks

Brent for April settlement down to $53.33 a barrel on the London-based ICE Futures Europe exchange.

Oil extended its collapse to the lowest intraday price since March 2009 on speculation that record US supply may start to strain the country’s storage capacity.

Crude tanks in the US may fill up as drilling-rig cuts fail to slow production this year, the International Energy Agency predicted. Speculators have cut bullish bets on oil to the lowest level in more than two years while short wagers rise to a record, US Commodity Futures Trading Commission data show. Futures lost as much as 2.8 per cent to $43.57 a barrel in New York on Monday, falling for a fifth day.

Oil is extending a fourth weekly slump after government data showed US output and stockpiles expanded to the highest levels in more than three decades, exacerbating a glut that drove prices almost 50 per cent lower last year. The market hasn’t bottomed yet because of the surplus, former Federal Reserve chairman Alan Greenspan said on Bloomberg Television.

“We’ve got this ongoing increase in inventory with no cut in production, despite the drop in the number of shale-oil rigs,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “We’re seeing downside momentum now develop in the market.”

West Texas Intermediate for April delivery was down 49 cents, or 1.1 per cent, at $44.35 a barrel in electronic trading on the New York Mercantile Exchange at 2.16pm. Singapore time. The contract fell $2.21 to $44.84 on Friday, capping a 9.6 per cent loss for the week, the most since December. The volume of all futures traded was about 74 per cent more than the 100-day average. Prices have decreased 17 per cent this year.

Brent for April settlement, which expires today, slid as much as $1.34, or 2.5 per cent, to $53.33 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $9.90 to WTI. The more active Brent contract for May was 31 cents lower at $54.70.

US oil production will expand this year by about 750,000 barrels a day to 12.56 million a day, the IEA said in a report on Friday. That’s up from an estimate of 12.41 million in last month’s report. The Paris-based agency, an adviser to developed economies, boosted its projection for North American output including natural gas liquids and condensate in the fourth quarter of 2014 by 300,000 barrels a day.

“The trend is still weak and there will still be downward pressure from the market’s oversupply,” said Takashi Hayashida, the chief executive officer of Elements Capital, a Tokyo-based hedge fund that focuses on energy and commodities.

Crude stockpiles in the US, the world’s biggest oil consumer, rose to 448.9 million barrels through March 6, according to the Energy Information Administration. That’s the highest level in weekly records dating back to August 1982. The nation pumped 9.37 million a day, the most since January 1983.

Rigs targeting oil in the US shrank by 56 to 866 last week, the fewest since March 2011, said Baker Hughes. Companies have idled 709 machines since the start of December, a 45 per cent decline, according to the services company.

Low oil prices are hurting all producers including Saudi Arabia, which “has never been in a price war with anybody,” according to Ibrahim Al-Muhanna, an adviser to Saudi oil minister Ali Al-Naimi. Prices have stabilised at about $60 a barrel based on fundamental market forces, he said at a conference in Doha, Qatar.

Saudi Arabia led Opec in resisting calls to cut output at a meeting in November. The 12-member group, which supplies about 40 per cent of the world’s oil, is scheduled to gather on June 5.

Hedge funds and other money managers reduced their net-long position on WTI by 2.5 per cent in the seven days ended March 10, according to the CFTC.

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