Wednesday, March 30, 2016

Oil drops a fourth day as U.S. stockpiles seen expanding glut

NEW YORK -- Oil declined for a fourth day before weekly U.S. government data forecast to show increasing crude stockpiles kept supplies at the highest level in more than eight decades.

Futures lost as much as 1.8% in New York after slipping 0.2% Monday. Inventories probably rose by 3 MMbbl last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. That would be a seventh weekly gain. Traders boosted net-long positions in U.S. crude last week to the highest since mid-June, exchange data showed.

Oil faces “an overhang of excess production capacity and inventories,” Kevin Norrish, managing director for commodities research at Barclays Plc, said in a report. Markets “also face another obstacle in the recovery process, that of positioning, which is now approaching bullish extremes.”

Oil tumbled to a 12-year low this year before rebounding on speculation the global surplus will ease as U.S. output declines. Saudi Arabia, Russia, Qatar and Venezuela agreed last month they would cap production at January levels if other producers followed suit to tackle a global oversupply.

West Texas Intermediate for May delivery fell as much as 69 cents to $38.70/bbl on the New York Mercantile Exchange and was at $38.80 as of 10:24 a.m. London time. The contract lost 7 cents to close at $39.39 Monday. A fourth day of declines would be the longest run of losses since Feb. 11.

U.S. Stockpiles

Brent for May settlement dropped as much as 80 cents, or 2%, to $39.47/bbl on the London-based ICE Futures Europe exchange. The contract fell 17 cents to $40.27 Monday, the lowest close since March 15. The global benchmark crude was at a premium of 75 cents to WTI on Tuesday.

Money managers boosted net-long positions in WTI by 15% to 235,830 contracts in the week to March 22, the highest since the week to June 16, according to the U.S. Commodity Futures Trading Commission.

U.S. crude inventories increased to 532.5 MMbbl through March 18, according to data from the EIA. Gasoline stockpiles probably dropped by 2.5 MMbbl last week, according to the median estimate in the Bloomberg survey. That would be a sixth weekly decline.
Indonesia will attend a meeting of major oil exporters in Doha next month to consider an output freeze, according to Energy and Mineral Resources Minister Sudirman Said. Prices need to be at a sustainable level that’s attractive for producers without creating pressures, Said told reporters in Jakarta.

Other news:

Crude at $45/bbl to $50/bbl is enough to encourage India’s exploration without squeezing fuel consumers, Oil Minister Dharmendra Pradhan said in an interview Monday. Commodities including oil and copper are at risk of steep declines as recent advances aren’t fully grounded in improved fundamentals, according to a report from Barclays.


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