Crude Falls as Global Oil Supply Glut Outweighs Dollar Weakness

  • U.S. supply rose to highest level since 1930 last week, EIA
  • Venezuela says 6 OPEC states are open to talks on price drop

Could Recent Higher Oil Be Early Signs of Bottom?

Oil retreated as the highest U.S. crude supplies in more than 80 years outweighed a weakening U.S. dollar.

West Texas Intermediate oil slipped 1.7 percent. Crude stockpiles climbed 7.79 million barrels to 502.7 million last week, the highest since the 1930s, according to weekly and monthly data from the Energy Information Administration. Futures climbed as much as 4.1 percent earlier as the Bloomberg Dollar Spot Index, which tracks the currency against major peers, declined on signs of a slowing U.S. economy. 

"There’s only so much the dollar can do in the face of these overwhelming fundamentals," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "It looks like we’ve priced in the dollar’s weakness."

Oil is down 14 percent this year as the market focuses on an expected boost in Iranian exports after the removal of sanctions and brimming U.S. crude stockpiles. Venezuela said six OPEC members and two non-members would attend an extraordinary meeting if one is called. Commerzbank AG said it’s skeptical that any output cuts will result from the effort. Royal Dutch Shell Plc said fourth-quarter profit fell 44 percent.

WTI, Brent

West Texas Intermediate for March delivery slipped 56 cents to close at $31.72 a barrel on the New York Mercantile Exchange. It surged 8 percent Wednesday. Prices closed below $30 on Tuesday for the first time since Jan. 21 after the biggest two-day decline since 2009. Total volume traded was 70 percent above the 100-day average.

Brent for April settlement fell 58 cents, or 1.7 percent, to $34.46 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at an $1.08 premium to April WTI.

“The low is in,” T. Boone Pickens, the founder and chairman of BP Capital LLC, said Thursday in an interview on “Bloomberg Go."“The market is going to be volatile. It’s not going to go straight up, so there will be good entry points.”

Signs of a slowing U.S economy have hurt the dollar by derailing wagers that the Federal Reserve would continue raising interest rates while other central banks increased stimulus. Currency traders are catching up to the bond market, where 10-year yields sank to the lowest in a year on Wednesday and futures sent the strongest signal yet that traders expect the Federal Reserve to stand pat on rates in 2016.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI at the nation’s biggest storage site, rose by 747,000 barrels to 64.2 million last week, 24,000 barrels short of a record, EIA data show. Gasoline stockpiles climbed 5.94 million barrels to 254.4 million, the highest in weekly records going back to 1990.

Members of the Organization of Petroleum Exporting Countries and non-OPEC producers need to meet soon, said Ali Akbar Velayati, adviser to Iran’s Supreme Leader Ali Khamenei, while in Moscow, according to Interfax. Velayati met Russian President Vladimir Putin and Igor Sechin, CEO of the country’s largest crude producer, Rosneft NK OAO, during his visit.

"There’s a lot of skepticism that the Venezuelans will get anything accomplished," said Phil Flynn, senior market analyst at Price Futures Group in Chicago. "The market keeps switching its focus from the glut we have now and the tighter supplies we should have in a few months. The massive cuts in capital expenditures we’re hearing in earnings calls guarantee that supplies will be tighter down the road."

Statoil ASA, Norway’s biggest oil company, deepened investment cuts and offered to pay dividends in stock. Royal Dutch Shell said it depleted its oil and gas reserves much faster than it replenished them with new resources in 2015, its worst performance since 12 years ago.

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