London - Brent crude dropped for a fifth day, its longest retreat in almost three months, amid signs that the global supply glut will persist.
Futures fell as much as 1.6 percent in London to the lowest in three weeks. US crude inventories are projected to have increased further from a record high last week, according to a Bloomberg News survey before an Energy Information Administration report on Wednesday. Opec won’t change its policy to maintain output at the next meeting unless producers outside the group also agree to cut their production, the former Qatar energy minister said.
Oil has rebounded after reaching a five-year low in January amid speculation that a global surplus would diminish as the year progresses. Since the start of December, drillers in the US have reduced the number of active rigs seeking oil by 41 percent to 922, the fewest since April 2011, Baker Hughes data showed.
“The problems of oversupply haven’t gone away,” Michael Hewson, London-based senior market analyst at CMC Markets PLC, said by phone. “Inventories keep on building yet prices haven’t collapsed. It will be interesting to see whether the US has to cut production when it hits its storage capacity.”
Brent for April settlement dropped as much as 92 cents to $57.61 a barrel on the London-based ICE Futures Europe exchange and was at $57.68 at 10:05 a.m. local time . It slid $1.20 to $58.53 on Monday, the lowest close since February 12. The European benchmark crude traded at a premium of $8.17 to WTI.
Shale plays
West Texas Intermediate crude for April delivery was down 51 cents at $49.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 39 cents to $50 on Monday. The volume of all futures traded was about 44 percent below the 100-day average for the time of day. Prices have decreased 7.1 percent this year.
The Organisation of Petroleum Exporting Countries will keep the same policy at its next meeting in June unless non-Opec producers agree to collective action, Abdullah bin Hamad al- Attiyah, Qatar’s former minister of energy and industry, said at the Doha Energy Forum on Tuesday. For countries in the Persian Gulf, $60 a barrel is not a bad price “if they correct their budgets”, he said.
Production from six major US shale plays will average 5.6 million barrels a day in April, the Energy Information Administration said in its monthly Drilling Productivity Report on Monday. That’s up 298 barrels a day from March, the smallest projected gain since February 2011.
Clear direction
The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Permian and Eagle Ford in Texas and the Bakken in North Dakota.
Crude inventories probably expanded by 4.75 million barrels through March 6, according to the median estimate in the Bloomberg survey of eight analysts. Supplies previously climbed to 444.4 million, the highest level in weekly EIA records dating back to August 1982.
“The market is expecting production to shrink and prices to rebound,” Kang Yoo Jin, a commodities analyst at NH Investment & Securities Company in Seoul, said by phone. “The stockpiles and production data we’re getting are at record highs and this gap between what the market expects and the data we’re actually getting makes prices move without a clear direction.”
Bets on WTI falling below $35 a barrel by June have lost almost 80 percent of their value as futures recovered from a six-year low. June $30 and $35 puts, or wagers that prices will drop below those levels, have declined since January. Prices traded within an $8 range last month, the least since September.
* With assistance from Heesu Lee in Seoul
Bloomberg