OIL declined as expanding US crude inventories kept supplies at the highest level in more than eight decades, adding to a global oversupply.
Futures fell as much as 0.9 percent, erasing a 0.9-percent gain on Wednesday. Stockpiles increased for a second week to 507.6 million barrels, the most since 1930, according to an Energy Information Administration (EIA) report. Prices won’t recover until the second half of next year at the earliest, Mexican Energy Minister Pedro Joaquin Coldwell said at a conference in Houston, estimating that the market is oversupplied by about 2 million barrels a day.
“Any rally is going to be subdued primarily because of the large inventory levels,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We expect the volatility to ease, but the risks are still to the downside.”
Oil is down about 14 percent this year on speculation a global glut will be prolonged amid brimming US stockpiles and the outlook for increased exports from Iran after the removal of international sanctions. US driller Continental Resources Inc. halted all fracking in the Bakken shale region after posting its first annual loss since the company’s public debut in 2007.
West Texas Intermediate (WTI) for April delivery dropped as much as 30 cents to $31.85 a barrel on the New York Mercantile Exchange and was at $31.89 at 11:59 a.m. Hong Kong time. The contract rose 28 cents to $32.15 on Wednesday. Total volume traded was about 7 percent below the 100-day average. Prices lost 30 percent last year.
Brent for April settlement fell as much as 39 cents, or 1.1 percent, to $34.02 a barrel on the London-based ICE Futures Europe exchange. The contract advanced $1.14, or 3.4 percent, to $34.41 on Wednesday. The European benchmark crude was at a premium of $2.17 to WTI.
US crude stockpiles expanded by 3.5 million barrels through February 19, according to the EIA report on Wednesday. Supplies at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, increased for a fourth week to a record 65.1 million barrels. The site has a working capacity of 73 million barrels, EIA data shows.
Production declined for a fifth week to 9.1 million barrels a day, according to EIA data. Gasoline inventories dropped for the first time since November, falling 2.2 million barrels from the highest level since January 1990.
Mexico, which is not a member of the Organization of the Petroleum Exporting Countries (Opec), is willing to participate in a meeting with Opec and non-Opec producers to discuss a potential output freeze, Coldwell said in an interview on Wednesday at the IHS CERAWeek conference in Houston. He met with Saudi Arabia’s Oil Minister Ali al-Naimi on Tuesday.