Oil dropped for a second day in New York as speculation mounted that OPEC will consider boosting output to compensate for disruptions in Libya and rising U.S. supplies signaled weakening demand.
Futures slid as much as 0.8 percent after U.S. crude inventories climbed the most since November, according to American Petroleum Institute data. Angola’s oil minister said the Organization of Petroleum Exporting Countries should wait to see how events in Libya unfold before calling an emergency meeting about prices and production. Kuwait’s oil minister yesterday said members of the group are weighing an “urgent” meeting to determine whether more output is needed.
“I think the situation in Libya to some degree is contained from an oil-price point of view,” said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. “There is also a lot of supply in the market, it’s not tight.”
Crude for April delivery decreased as much as 81 cents to $104.21 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.30 at 3:39 p.m. Singapore time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.
Brent oil for April settlement slipped 41 cents, or 0.4 percent, to $112.65 a barrel on the London-based ICE Futures Europe exchange. The contract jumped 3.4 percent last week, its sixth weekly increase.
U.S. crude inventories climbed 3.8 million barrels last week to 348.5 million, the industry-funded American Petroleum Institute said. An Energy Department report today may show stockpiles increased by 1 million barrels, according to a Bloomberg News survey of analysts.
Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to Bloomberg estimates.
Crude dropped yesterday after Sheikh Ahmad al-Abdullah al-Sabah, Kuwait’s oil minister, told reporters that OPEC Secretary General Abdalla El Badri is contacting members to see whether a meeting on output levels is needed.
“The information that we have is that the market is supplied,” Angolan Oil Minister Jose Maria Botelho de Vasconcelos told reporters at an IHS Cambridge Energy Research Associates conference in Houston yesterday. Prices have risen because of geopolitical problems in North Africa, and “we need to wait a little bit” to act, he said.
Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, OPEC’s biggest producer, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
The premium of front-month Brent futures to West Texas Intermediate, the grade traded in New York, surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the WTI delivery point. The premium was at $8.33 today.
The spread has narrowed even as supplies at Cushing continue to rise. Stockpiles there have climbed to a record 40.3 million barrels, the API data showed yesterday. Brent’s premium has narrowed as hedge funds and other financial investors buy New York futures, according to Anthony Nunan, the assistant general manager for risk management at Mitsubishi Corp. in Tokyo.
“Even though there is this oversupply there is a lot of demand for WTI as a financial asset,” Nunan said by telephone today. “Despite all this talk about it being a broken benchmark the financial community doesn’t seem to care.”