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By Bloomberg

Oil trimmed the biggest weekly advance in more than four years as signs that a global supply glut may expand countered a slowdown in U.S. production.

Futures slid 1.2 percent in New York, reducing gains this week to 8.5 percent, the most since February 2011. U.S. crude stockpiles swelled to the highest level in 85 years even as output decreased last week, according to the Energy Information Administration. Saudi Arabia pumped the most in three decades in March, according to the Organization of Petroleum Exporting Countries.

Oil has rallied about 30 percent from a six-year low in March amid speculation the idling of U.S. rigs is spurring a slowdown that will alleviate the global surplus. Production from shale formations will decline in May, the EIA said April 13, the first time the agency forecast a drop since it began publishing a monthly drilling report in 2013.

“The underlying trend that has led to the speculative revival is the expectation of lower U.S. production,” Olivier Jakob, managing director of Zug, Switzerland-based consultancy Petromatrix GmbH, said by phone. “With the drop in drilling rigs we should expect U.S. production to reach a plateau while Saudi Arabia is showing they want to keep their market share or even increase it.”

West Texas Intermediate for May delivery was at $56.02 a barrel in electronic trading on the New York Mercantile Exchange, down 69 cents, at 11:31 a.m. London time. The contract climbed 32 cents to $56.71 on Thursday. Trading volume was 17 percent below the 100-day average for the time of day.

U.S. Supplies

Brent for June settlement was 56 cents lower at $63.42 a barrel on the London-based ICE Futures Europe exchange. It’s up 9.5 percent this week. The European benchmark traded at a premium of $5.89 to WTI.

Crude stockpiles in the U.S., the world’s biggest oil consumer, increased by 1.29 million barrels to 483.7 million through April 10, the EIA reported this week. That’s the highest level in weekly data compiled by the Energy Department’s statistical arm since August 1982. Monthly records dating back to 1920 show supplies haven’t been this high since 1930.

Production fell by 20,000 barrels a day to 9.38 million a day last week. Output from prolific tight-rock formations such as North Dakota’s Bakken shale will shrink 57,000 barrels a day in May, the EIA said in the drilling report.

“The market had been waiting for a reduction to output and it’s potentially the start of some more significant cuts in the U.S.,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “The big picture is still one of oversupply. We have very large inventories, which are going to place some sort of natural brake on the market.”

Drillers seeking oil cut the number of active machines to 760 last week, the fewest since December 2010, according to Baker Hughes Inc., an oilfield-services company. The rig count has slid 52 percent since December.

Job Cuts

Schlumberger Ltd. will eliminate an additional 11,000 positions in a sign the industry will undergo another round of job cuts after prices slumped by almost half last year. The world’s largest provider of oilfield services announced plans in January to trim its workforce by 9,000 in what was then the single biggest reduction in the sector.

Saudi Arabia boosted crude production by 658,800 barrels a day in March to 10.294 million a day, according to data it communicated to OPEC’s secretariat in Vienna. The kingdom led a November decision by the 12-member group to defend market share and ignore calls to cut output. OPEC has pumped above its collective quota of 30 million a day every month since June, estimates compiled by Bloomberg show.

WTI may decline next week, according to a Bloomberg survey. Fifteen of 30 analysts and traders predict futures will drop through April 24, while 12 said prices will advance.