WTI Crude Falls to Six-Week Low as U.S. Inventories Grow

Oil Inventories at Highest Levels We’ve Seen

U.S. crude prices settled at a six-week low on concern that production increases will add to a glut.

West Texas Intermediate widened its discount to Brent as U.S. inventories rose to the highest level since weekly data started in 1982. The Houston Ship Channel reopened to traffic today, allowing refineries to receive crude imports. WTI also dropped as Genscape Inc. reported stockpiles at Cushing, Oklahoma, continued to climb through March 10, according to Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

“Production continues to increase, and we continue to grow storage,” said Michael Hiley, head of over-the-counter energy trading at LPS Partners Inc. in New York. “It’s still a bearish market.”

West Texas Intermediate for April delivery slid $1.12, or 2.3 percent, to $47.05 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 29. The volume of all futures traded was about 15 percent above the 100-day average for the time of day.

Brent for April settlement fell 46 cents, or 0.8 percent, to $57.08 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to WTI increased to $10.03 a barrel from $9.37 yesterday.

Brent gained earlier as the dollar weakened from the strongest level in 12 years, boosting the investment appeal of commodities.

Spread Widens

“The Brent-WTI spread is back above $10. People are putting more long positions in Brent than WTI because of the weak fundamental picture here,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut.

U.S. crude inventories increased by 4.51 million barrels to 448.9 million in the week ended March 6, the highest level in weekly data compiled since August 1982, the Energy Information Administration reported on Wednesday. The nation pumped 9.37 million barrels a day last week, the highest in EIA estimates going back to January 1983.

Stockpiles at Cushing, 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.

U.S. refiners operated at 87.8 percent of their capacity last week, up from 86.6 percent the previous week.

The Houston Ship Channel segment that was shut after collision has reopened, according to Andy Kendrick, a U.S. Coast Guard spokesman. Exxon Mobil Corp. said its Baytown refinery in Texas will receive crude shipments soon.

Diesel, Gasoline

“Imports will start unloading, and refineries wouldn’t have to draw on domestic supplies,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston, Texas. “As imports arrive, refineries would restore their operation and product supplies would return.”

Ultra low sulfur diesel dropped 2.3 percent to $1.7791 a gallon on the Nymex and gasoline futures fell 0.9 percent to $1.8095.

WTI has lost more than half of its value since June, forcing U.S. producers to curb their drilling. Drillers 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 and Organization of Petroleum Exporting Countries members Saudi Arabia and the United Arab Emirates have all increased production, he said at a forum in Muscat. Oman is the biggest non-OPEC producer in the Middle East.

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