BLBG: Crude Oil Falls to a Three-Week Low After U.S. Supply Increase
Crude oil fell to a three-week low in New York after a U.S. government report yesterday showed a bigger-than-expected increase in inventories.
Supplies have gained in 18 of the past 20 weeks, leaving stockpiles the highest since July 2007, the Energy Department report showed. World oil consumption will drop 1.7 percent to 84.3 million barrels a day this year, consultant Wood Mackenzie said in a report today. The Energy Department and International Energy Agency cut their demand forecasts earlier this week.
“Inventories keep increasing and we continue to get reports downgrading demand forecasts,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “There’s increasing pressure on crude oil, especially the front month.”
Crude oil for March delivery fell $1.01, or 2.8 percent, to $34.93 a barrel at 9:20 a.m. on the New York Mercantile Exchange. Futures touched $34.52, the lowest since Jan. 20. Oil is down 22 percent this year and 62 percent from a year ago.
The discount of West Texas Intermediate, the grade that’s traded in New York, to London’s Brent widened to the most since Jan. 16 after Royal Dutch Shell Plc said it may miss deliveries of oil from Nigeria because of security concerns.
Shell issued a force majeure declaration, allowing it to suspend contractual sales obligations for reasons beyond its control, from Feb. 10 onwards, The Hague-based Shell spokesman Rainer Winzenried said in a phone interview today.
Brent crude oil for March settlement declined 3 cents to $44.25 a barrel on London’s ICE Futures Europe exchange. Brent futures were trading at a $9.32 premium over oil in New York.
Prices for delivery in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil.
Cushing Inventories
Supplies at Cushing, Oklahoma, where West Texas Intermediate oil traded on Nymex is stored, climbed 1.7 percent to 34.9 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.
“The IEA revised global demand lower yesterday and inventories declined more than was expected,” said Adam Klopfenstein, senior market strategist for Lind-Wedlock in Chicago, a division of MF Global Ltd. “This is a fundamentally bearish setup.”
