NEW YORK CITY – Oil prices tumbled more than 4% on Wednesday as surging US stockpiles and a rallying dollar prompted traders to dump crude contracts amid signs the world’s largest oil producers will not cut production when they meet this week, Reuters reported.
Warmer-than-usual weather in the northeastern United States, a major market for heating oil, also exerted a deflationary effect on prices.
US crude’s West Texas Intermediate (WTI) futures hit contract lows after government data showed a 10th straight week in crude builds.
Brent futures approached new lows not seen since March 2009, with OPEC widely expected to uphold at its meeting in Vienna on Friday a decision from last year to pump oil vigorously to protect market share from non-OPEC members like the US and Russia.
“From the looks of it, we could be trading below $40 a barrel by the time OPEC concludes on Friday,” Tariq Zahir at New York’s Tyche Capital Advisors was quoted to say.
Brent settled down $1.95, or 4.4%, at $42.49/bbl. It hit a session low of $42.43, just 20 cents off from the 6½-year low it struck in August. WTI finished the session down $1.91, or 4.6%, at $39.94, before returning to above $40 in post-settlement. Its low for the day was $39.84, a bottom for its front-month January contract.
Heating oil fell almost 5% as Thomson Reuters Analytics data showed sharply reduced heating demand through mid-December. US crude oil inventories rose 1.2 MMbbl last week, up for a 10th straight week, data from the Energy Information Administration (EIA) showed. Stocks of gasoline and distillates also rose.
“It is another data point pointing to a continued glut in the US markets for oil,” observed Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. “Production declines remain stubborn even with oil prices hovering at current levels [as they have] for a significant amount of time now,” Jarvis was quoted to say.
Inventories at the Cushing, Oklahoma, delivery hub for US crude futures accounted for one-third of the build, the EIA reported.
Brent and WTI briefly turned positive during Wednesday’s session after a headline from Tehran’s oil ministry news agency Shana that a majority of OPEC members agree on output cuts.
Prices fell back after the report also pointed out that OPEC kingpin Saudi Arabia was not agreeable to the reduction.