Oil Falls Most in 6-Weeks as U.S. Supplies Expand, Imports Surge

  • Crude inventories rose by 9.36 million barrels last week: EIA
  • Imports climb 9 percent to most since June 2013: EIA Report

Oil Hits $40 Again: Is It Time for a Pullback?

Oil dropped the most in six weeks after a U.S. government report showed crude supplies climbed to the highest level in more than eight decades as imports surged.

West Texas Intermediate declined 4 percent. The inventories rose last week by more than three times what was projected in a Bloomberg survey, and imports reached the highest level since June 2013, Energy Information Administration data show. Stockpiles at Cushing, Oklahoma, the biggest U.S. oil-storage hub, dropped from a record high.

"This was a very big build in crude stocks," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "Nearly all of the gain was due to imports."

Oil tumbled to a 12-year low last month before rebounding on speculation the global surplus will ease. About 15 or 16 oil-exporting countries will attend a meeting that will consider an output freeze on April 17, OPEC Secretary General Abdalla El-Badri said in Vienna Monday. There’s potential for supply shocks after energy companies from Chevron Corp. to BP Plc cut billions of dollars in spending amid the price crash, according to the International Energy Agency.

WTI oil for May delivery dropped $1.66 to settle at $39.79 a barrel on the New York Mercantile Exchange. It was the biggest decline since Feb. 11. Total volume traded was 15 percent below the 100-day average at 2:44 p.m.

Brent for May settlement fell $1.32, or 3.2 percent, to $40.47 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a 68-cent premium to WTI.

Insufficient Spread

"This shows that Brent is not trading at nearly a wide enough premium to WTI," Evans said. "We are not going to see a downturn in imports to the U.S. until WTI is trading at least at a $5 discount to Brent."

Crude inventories rose 9.36 million barrels last week to 532.5 million barrels, the highest level since 1930, according to the EIA report. Imports increased 9 percent to 8.38 million barrels a day. Supplies at Cushing, the delivery point for WTI traded in New York, slipped 1.26 million barrels.

"This highlights the fact that those expecting a tightening market are still just hoping," said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. "I agree that we’ll eventually see a tightening, but there’s no evidence it’s happening yet."

Falling Output

Production fell by 30,000 barrels a day to 9.04 million, the lowest since November 2014. Rigs targeting oil in the nation’s fields rose by one last week to 387, Baker Hughes Inc. data show. The rig count slipped to the lowest since November 2009 the prior week.

Gasoline inventories tumbled 4.64 million barrels, the biggest decline since May 2014. Stockpiles of distillate fuel, a category that includes diesel and heating oil, rose 917,000 barrels.

The dollar’s advance for a fourth day against the euro marked its longest stretch of gains in more than a month as Federal Reserve officials signaled their expectation for another interest-rate increase. The dollar appreciated 0.3 percent to $1.1183 per euro as of 2:50 p.m.

Production freeze and oil-market news:

  • Iraq will take part in a meeting of major oil exporters in Doha next month, Asim Jihad, Oil Ministry spokesman, said by phone.
  • Angola will attend the Doha summit between OPEC and non-OPEC producers to discuss an oil-output freeze, a person with knowledge of matter said.
  • There is some recovery in the oil market as demand increases and supply declines, Eni SpA Chief Executive Officer Claudio Descalzi said Tuesday in a Bloomberg Television interview.
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