Azernews.Az

By Bloomberg

Oil fell for the first time in four days amid speculation that U.S. supply will continue to exacerbate a global glut.

Futures dropped as much as 1.5 percent in New York. U.S. production of oil from hard-to-penetrate rock formations will expand to 5.2 million barrels a day by the end of this decade from about 3.6 million a day last year, the International Energy Agency said on Tuesday. The United Steelworkers union and Royal Dutch Shell Plc will resume negotiations to try and end the biggest U.S. oil-worker strike since 1980.

Rising U.S. production is contributing to a surplus that drove prices almost 50 percent lower in 2014. The Organization of Petroleum Exporting Countries, which has resisted calls to reduce output, boosted estimates for the amount of crude it will need to supply this year.

“If we want to see the price back to $80 or $90, we need to see a good amount of current production taken out of the market, and that’s not happening,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “We’re certainly not expecting any sustained rally until later in the year, and that will require someone to cut output.”

West Texas Intermediate for March delivery decreased as much as 81 cents to $52.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $52.10 at 1:18 p.m. Singapore time. The contract gained $1.17 to $52.86 on Monday. The volume of all futures traded was about 19 percent below the 100-day average.

U.S. Shale

Brent for March settlement slid as much as 83 cents, or 1.4 percent, to $57.51 a barrel on the London-based ICE Futures Europe exchange. It climbed 54 cents to $58.34 on Monday. The European benchmark crude traded at a premium of $5.44 to WTI.

Oil’s collapse is unlike previous declines as it’s driven by both supply and demand, according to the IEA, the energy adviser to developed economies. The U.S. has unlocked a vast resource that has “profoundly upended the traditional division of labor between OPEC and non-OPEC,” the Paris-based agency said in its Medium-Term Oil Market Report.

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has opened shale formations from Texas to North Dakota. Production surged to 9.21 million barrels a day through Jan. 23, the fastest pace in weekly data compiled by the Energy Information Administration since January 1983.

‘$20’ Oil

U.S. crude inventories probably increased by 3.5 million barrels last week, according to the median projection in a Bloomberg News survey of seven analysts before an EIA report on Wednesday. Stockpiles in the prior period were at 413.1 million, the highest level in weekly records from the Energy Department’s statistical arm dating back to August 1982.

Oil may fall to “the $20 range” by the start of the second quarter as an oversupply fills storage tanks close to capacity, Citigroup Inc. predicted. Recent price advances from the lowest levels in almost six years are “more like a head- fake than a sustainable turning point,” said Edward Morse, the bank’s global head of commodity research in New York.

OPEC said it will need to ship more oil as it made the deepest cut in at least six years to its forecast for output growth from non-member producers, according to a report on Monday. The 29.2 million barrels a day required remains about 1 million a day below its current output. The group’s 12 members pump about 40 percent of the world’s oil.

Rating Cut

The collapse in prices has roiled economies of producing nations from Russia to Nigeria. Venezuela’s gross domestic product could shrink as much as 7 percent this year, according to Standard & Poor’s. S&P cut the OPEC member’s credit rating and said the government will struggle to implement changes needed to shore up the economy, according to a Feb. 9 statement.

United Steelworkers, representing employees at more than 200 refineries, fuel terminals, pipelines and chemical facilities across the U.S., will resume talks on a labor agreement on Tuesday. Shell is bargaining on behalf of companies including Exxon Mobil Corp. and Chevron Corp. The plants currently on strike can process about 2.36 million barrels a day of oil, or 13 percent of total U.S. capacity.