Brent Crude Falls First Time in Three Days as Supply Seen Rising

$20 Oil Could Be a Reality If This Happens

Brent crude dropped for the first time in three days on concern a global supply glut will persist.

Saudi Arabia, the world’s biggest exporter, is pumping about 10 million barrels a day, close to the record amount produced in 2013. U.S. crude stockpiles expanded for an 11th week through March 20, a Bloomberg News survey showed before a report from the Energy Information Administration Wednesday.

Brent and West Texas Intermediate crudes have retreated from this year’s peak in February as the Organization of Petroleum Exporting Countries pumped more oil than its target and U.S. crude output surged to the highest levels in more than three decades. Oil gained earlier as a weaker dollar boosted the appeal of commodities priced in the U.S. currency.

“U.S. production is still rising and the Saudis are not cutting, so we are going to be in this glut for a while,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We don’t have any bullish news out there except for the U.S. dollar.”

Brent for May settlement slid 81 cents, or 1.4 percent, to $55.11 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $7.6 to WTI on the ICE.

WTI for May delivery gained 6 cents to $47.51 a barrel on the New York Mercantile Exchange. Total volume was about 25 percent below the 100-day average for the time of day at 2:55 p.m.

Crude Inventories

U.S. crude inventories gained for 10 weeks to 458.5 million barrels in the week ended March 13, the highest in weekly data compiled by the Energy Department’s statistical arm since August 1982. Stockpiles may have gained 4.75 million last week, according to the Bloomberg survey.

Supplies at Cushing, Oklahoma, the delivery point for WTI contracts, were 54.4 million barrels as of March 13, the most in records going back to 2004. The hub has a working capacity of 70.8 million, according to the EIA.

“We are in the shoulder season and demand is weaker and supply is going up,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Saudis are still producing a lot of oil and U.S. inventories are still rising. The dollar is definitely a factor that’s in play here.”

The American Petroleum Institute said Tuesday that U.S. crude supplies gained 4.8 million barrels last week, according to people familiar with the report. Cushing stockpiles increased 2 million, the API was said to report.

Saudi Arabia is able to meet demand from any customer, Oil Minister Ali al-Naimi said at a conference in Riyadh, Saudi Arabia, on Sunday. The country’s output was 9.85 million barrels a day in February, according to data compiled by Bloomberg.

OPEC Target

OPEC, which pumps about 40 percent of the world’s oil, produced 30.6 million in February, surpassing its target of 30 million for a ninth month, according to Bloomberg data.

Oil prices will continue to fall in the second quarter as refineries shut for maintenance, curbing demand for crude, according to forecasters at Societe Generale SA and Facts Global Energy.

Demand will slow because of planned shutdowns, sending Brent crude, the global benchmark, to as low as $35 a barrel, Fereidun Fesharaki, Facts Global chairman, told a conference on Tuesday in Fujairah, United Arab Emirates.

The next few months will be “detrimental for oil” with Brent averaging $51.30 in the second quarter, Alain Bokobza, SocGen’s head of strategy in global asset allocation, said in a report e-mailed Tuesday.

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