Hong Kong - Oil extended its decline back below $30 a barrel before weekly US government data forecast to show crude stockpiles expanded for a third week, exacerbating a global glut.
Futures decreased as much as 3.6% in New York after dropping 5.8% on Monday. Inventories probably rose by 4 million barrels last week, a Bloomberg survey showed before an Energy Information Administration (EIA) report on Wednesday.
Saudi Arabia, the world’s biggest crude exporter, said low prices won’t reduce its spending on energy projects while the head of OPEC called on producers outside the group to assist in reducing the worldwide oversupply.
Oil is down about 20% this year as volatility in global markets adds to concern over brimming US stockpiles, steady production from Saudi Arabia and Russia and the outlook for increasing Iranian shipments after the end of sanctions. Bets West Texas Intermediate crude will retreat below $25 a barrel have reached a record high as inventories continue to expand.
“We are just sinking in an ocean of oil,” Komal Sri-Kumar, the Santa Monica, California-based founder and president of Sri- Kumar Global Strategies Inc., said in a Bloomberg Television interview. “There’s no indication Saudi Arabia or Russia is going to cut output.”
WTI for March delivery lost as much as $1.09 to $29.25 a barrel on the New York Mercantile Exchange and was at $29.58 at 11:07. The contract dropped $1.85 to $30.34 on Monday after the biggest two-day rally in more than seven years. Total volume traded was about 84% above the 100-day average. Prices slid 30% last year.
Oil supplies
Brent for March settlement fell as much as $1.23 to $29.27 a barrel on the London-based ICE Futures Europe exchange. The contract declined $1.68 to $30.50 on Monday. The European benchmark crude was at a premium of 24 cents to WTI.
US crude stockpiles increased by 3.98 million barrels to 486.5 million through January 15, keeping inventories more than 120 million barrels above the five-year seasonal average, according to data from the EIA. Supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, climbed to a record 64.2 million barrels.
China’s refineries will increase output in 2016, exacerbating a fuel glut and boosting shipments of diesel, kerosene and gasoline to regional markets, according to an annual research report from China National Petroleum. Net export of oil products - which strips out imports - will rise by 31% this year to 25 million metric tons, the report shows.
Crude volatility
Energy companies led a decline on the MSCI Asia Pacific Index. PetroChina, the nation’s biggest producer, lost 5.8% in Hong Kong, while Cnooc dropped 7.2%. The CBOE Crude Oil Volatility Index, a gauge of anticipated swings in US crude prices, closed on Monday near the highest since March 2009.
Saudi Arabian Oil is maintaining investment in oil and natural gas projects and has formulated a new strategy in response to cheaper crude as it studies options to sell shares in its parent company and downstream refining and chemical operations, chairperson Khalid Al-Falih said at a conference in Riyadh. The state-run producer, known as Saudi Aramco, can sustain low oil prices for “a long, long time,” he told reporters.
“It is vital the market addresses the issue of the stock overhang,” Organization of Petroleum Exporting Countries Secretary-General Abdalla El-Badri said Monday at a conference in London. “It should be viewed as something OPEC and non-OPEC tackle together.”