Azernews.Az

By Bloomberg

Oil traded near the lowest price in six years on estimates that U.S. crude inventories extended a record. Prices fell to a level that would mark the return to a bear market on a closing basis.

Futures fell as much as 2.9 percent in New York, a sixth straight daily decline. Crude stockpiles probably gained by 3.3 million barrels to 452.2 million last week, a Bloomberg News survey showed before an Energy Information Administration report on Wednesday. Production in Libya is near 490,000 barrels a day after the restart of the Elephant and Wafa fields, the Libya News Agency reported.

U.S. output has risen to the highest in three decades even as oil explorers idle an unprecedented number of drilling rigs. Price swings in crude will ease in the second half of the year and U.S. production will probably start contracting by December, Vitol Group’s chief executive officer said, predicting no return to $100 a barrel within three years.

“U.S. output continues to dominate discussions, as the drop in the rig counts failed to dent near-term output,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said in a report.

West Texas Intermediate for April delivery declined as much as $1.25 to $42.63 a barrel in electronic trading on the New York Mercantile Exchange and was at $43.14 as of 12:41 p.m. London time. A settlement at $42.82 or lower would be 20 percent below this year’s peak, meeting a common definition of a bear market. Monday’s close of $43.88 was the lowest since March 2009. The volume of all futures traded was roughly in line with the 100-day average for the time of day.

Crude Stockpiles

Brent for May settlement slipped as much as $1.37 to $52.57 a barrel on the London-based ICE Futures Europe exchange. The April contract expired on Monday after losing $1.23 to $53.44. The European benchmark crude traded at a premium of $7.66 to WTI for the same month.

U.S. crude inventories climbed for nine weeks through March 6 to 448.9 million barrels, the highest in weekly EIA records dating back to August 1982. Production accelerated to 9.37 million a day, the fastest pace since at least January 1983, according to the Energy Department’s statistical arm.

It’s uneconomic for some U.S. companies to continue operating at current prices and supply will eventually be cut, said Ian Taylor, CEO of Vitol, the world’s largest independent oil trader. The market remains oversupplied and prices may weaken further until that supply slowdown takes place, he said.

Iran Shipments

“The market will come to balance by the second half of the year and we should see prices steady up and maybe go up a bit from there,” Taylor said at a conference in Cape Town Tuesday.

There are some signs that OPEC producers could pump more oil.

Iran could increase exports by 1 million barrels a day if international sanctions were lifted, Oil Minister Bijan Namdar Zanganeh said as talks resumed over its nuclear program.

Iran’s government is negotiating an agreement with world powers to end a decade-long dispute over its nuclear activities. Diplomats from the U.S. and Iran, working toward an end-March deadline, resumed talks on Monday in Lausanne, Switzerland. The Persian Gulf nation exported 1.2 million barrels a day of oil last month, the International Energy Agency said March 13. The country is the fifth-largest producer in OPEC.

Libya, holder of Africa’s biggest oil reserves, has managed to restore some production despite clashes between its Tobruk- based government and their Islamist rivals, who control the capital in Tripoli. The rate of 490,000 barrels a day reported by Lana is more than double the average level pumped in February, when output was at the lowest in 10 months, according to data compiled by Bloomberg.