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Hong Kong - Brent oil extended its decline from the lowest close in more than 12 years as rising US crude stockpiles added to a swelling global glut.
Futures slid as much as 2.1% in London after falling 3.1% on Wednesday to settle at the lowest level since November 2003. Inventories rose by 4.6 million barrels last week, according to industry data, while official US government figures on Thursday are forecast to show a second weekly advance.
It’s the third consecutive year that global supply is exceeding demand, according to Fatih Birol, executive director of the International Energy Agency (IEA).
“Global growth weakening continues to drive crude prices lower and oil inventories higher, and it will take better macroeconomic key figures and comforting signals from major central banks” to “reverse the negative sentiment,” said Jens Pedersen, an analyst at Danske Bank A/S in Copenhagen. “Oil producers are not close to storage limits yet and will therefore continue to pump.”
Brent is down 26% this year amid volatility in Chinese markets and speculation the removal of restrictions that capped Iran’s crude sales will help to prolong a worldwide surplus.
“There needs to be a supply interruption to stabilise prices,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “There is a surplus, and if Iran can increase exports by 500 000 barrels a day, it’s very difficult to see a sustained rally in oil. Expect volatility to continue.”
US stockpiles
Brent for March settlement lost as much as 59 cents to $27.29 a barrel on the London-based ICE Futures Europe exchange and was at $27.60 as of 11:31 time, a 56c discount to West Texas Intermediate. The European benchmark crude lost 88c to $27.88 a barrel on Wednesday.
WTI for March delivery slid as much as 48c to $27.87 a barrel on the New York Mercantile Exchange. The February contract expired on Wednesday after falling 6.7% to $26.55, the lowest level since May 2003. Total volume traded was about 73% above the 100-day average.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US storage hub, rose by 60 000 barrels last week, the industry-funded American Petroleum Institute was said to report. Nationwide crude inventories are forecast to expand by 2.2 million barrels, according to a Bloomberg survey before data from the Energy Information Administration Thursday.
The IEA predicts markets could “drown in oversupply,” sending oil even lower, while Glencore Plc Chairman Tony Hayward sees prices remaining at current levels as the energy market weathers a “supply shock.”
Royal Dutch Shell, which is buying BG Group in the industry’s largest deal in a decade, said Wednesday it expects fourth-quarter profit to drop at least 42% after the rout in oil deepened. Woodside Petroleum Ltd., Australia’s second- largest producer, expects writedowns of as much as $1.2bn for 2015.
Venezuela wrote to fellow members of the Organisation of Petroleum Exporting Countries (OPEC) requesting an emergency meeting amid the collapse in prices, according to five people with knowledge of the matter. The letter was sent to the 12 other members of the group, the people said, asking not to be identified as the document isn’t public.
The South American country will find it hard to come up with the cash it needs to honor $4.5bn on of foreign bond payments this year after crude prices declined, Barclays economist Alejandro Arreaza said in a note titled “Point of No Return” on Wednesday.
