Azernews.Az

BY Bloomberg

Oil traded near the lowest price in almost six years after government data showed U.S. crude stockpiles increased to the highest level since at least August 1982, adding to signs that a global glut will persist.

Futures were little changed in New York after falling 3.9 percent on Wednesday. Crude inventories in the U.S., the world’s biggest oil consumer, expanded by 8.87 million barrels to 406.7 million last week, the Energy Information Administration reported. Oil may recover as early as the first half of this year as production is reduced, said Harold Hamm, the chief executive officer of Continental Resources Inc.

Rising U.S. crude supply is bolstering speculation that the global surplus that drove prices almost 50 percent lower in 2014 won’t be eliminated soon. Saudi Arabia, the world’s largest exporter, will continue to keep its output high to defend market share, according to Riyadh-based Jadwa Investment Co.

“Once again, it’s more supply,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. “The market still looks quite weak. If we have a move back to $45, it’s potentially finding a base. It’s just volatile price action within a range.”

West Texas Intermediate for March delivery was at $44.42 a barrel in electronic trading on the New York Mercantile Exchange, down 3 cents, at 1:44 p.m. Singapore time. The contract dropped $1.78 to $44.45 on Wednesday, the lowest close since March 2009. The volume of all futures traded was about 33 percent below the 100-day average.

U.S. Supplies

Brent for March settlement was 12 cents higher at $48.59 a barrel on the London-based ICE Futures Europe exchange. It slid $1.13 to $48.47 on Wednesday. The European benchmark crude traded at a premium of $4.24 to WTI.

Crude inventories at Cushing, Oklahoma, the delivery point for New York futures and the nation’s biggest oil-storage hub, climbed to 38.9 million barrels in the week ended Jan. 23, according to the EIA. Stockpiles gained for an eighth week to the highest level since January 2014.

Production accelerated by 27,000 barrels a day to 9.21 million, the most in weekly estimates from the Energy Department’s statistical arm dating back to January 1983. Output has surged as a combination of horizontal drilling and hydraulic fracturing unlocked supplies in shale formations from Texas to North Dakota.

Shale Wells

Continental, the largest leaseholder and producer in the Bakken shale play of North Dakota and Montana, can weather low crude prices “forever” as it idles wells, Hamm said in an interview Wednesday in Houston.

Well-completion costs will decline in the future, he predicted, adding that if a producer can save 5 percent of those costs, it can wait a year to go forward. If more producers take that approach, the biggest drop in oil prices in five years will quickly be a memory, he said.

In Saudi Arabia, low crude prices “are not a priority for now” for the government, according to Jadwa Investment. The kingdom, the largest producer in the Organization of Petroleum Exporting Countries, will pump 9.6 million barrels a day this year and 9.4 million a day in 2016, it said in a report.