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By Bloomberg

Oil extended declines on speculation climbing U.S. inventories are adding to a global surplus.

Futures fell 0.4 percent in New York. U.S. crude stockpiles probably increased again last week from the highest in more than three decades, a Bloomberg News survey showed before an Energy Information Administration report on Wednesday.

lower prices are needed for American output to slow sufficiently to rebalance global markets, Goldman Sachs Group Inc. said in a report dated Feb. 10. West Texas Intermediate oil, the benchmark for U.S. oil, has dropped 49 percent in the past six months amid growing production from the U.S. to the Middle East.

“Prices will retreat in the next couple of weeks,” Andy Sommer, an analyst at Axpo Trading AG in Dietikon, Switzerland, said by phone. “We expect the fundamentals will worsen on further oversupply and push onshore physical storage capacity to its limit.”

West Texas Intermediate for March delivery fell 20 cents to $49.82 a barrel on the New York Mercantile Exchange at 11:58 a.m. London time, after earlier rising as much as $1.12. The contract dropped $2.84 to $50.02 on Tuesday, the biggest drop since Feb. 4. Prices have decreased 6.6 percent this year.

U.S. Production

Brent for March settlement fell 70 cents, or 1.2 percent, to $55.73 a barrel on the London-based ICE Futures Europe exchange. It slid $1.91 to $56.43 on Tuesday. The European benchmark crude traded at a premium of $6 to WTI.

U.S. production will increase by 7.8 percent to 9.3 million barrels a day this year, the fastest pace since 1972, the EIA said in its monthly report on Tuesday. That’s down 10,000 barrels a day from its January projection.

U.S. oil drillers cut the number of rigs in service by a record 435 to 1,140 in the nine weeks ended Feb. 6, data from Baker Hughes Inc. showed. That’s the lowest total since December 2011. The decline remains short of a level needed to balance the market, according to Damien Courvalin, a New York-based analyst at Goldman Sachs.

Crude inventories probably expanded by 3.75 million barrels in the week ended Feb. 6, according to the median estimate in a Bloomberg survey of analysts. Supplies rose the prior four weeks to reach 413.1 million barrels. The government report is scheduled for release at 10:30 a.m. in Washington.

Stockpiles climbed by 1.6 million barrels last week, the American Petroleum Institute said on Tuesday, reports on Twitter showed. The industry group in Washington collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that data be filed with the EIA, the Energy Department’s statistical arm.