LONDON--Oil prices slid Wednesday ahead of key U.S. inventory
data, as Saudi Arabia said it pumped oil at a record pace.
Though crude oil has recovered some ground after touching
multiyear lows in January, prices are still off by close to 50%
since last summer as global supply continues to exceed demand. Oil
futures have been whipsawing between gains and losses in recent
weeks as investors weigh signs of improving demand against high
supply from the world's biggest oil producers.
Brent crude for May delivery fell 1.3% to $58.30 a barrel on
London's ICE Futures exchange. On the New York Mercantile Exchange,
light, sweet crude futures for delivery in May traded at $52.68 a
barrel, down $1.30 from Tuesday's settlement.
Late Tuesday, the American Petroleum Institute, an industry
group, said its survey showed U.S. crude-oil inventories rose by
12.2 million barrels last week. The official data by the U.S.
Energy Information Administration will be released later on
Wednesday and analysts polled by The Wall Street Journal expect a
lower inventory increase of 3.4 million barrels.
U.S. inventories are already running at an 80-year high as
production has kept increasing despite the decline in the number of
oil drilling rigs in the U.S.
Adding to the global oil glut, Saudi Arabia, the world's top oil
exporter, raised its crude output to 10.3 million barrels a day in
March to a record high.
Ali al-Naimi, Saudi Arabia's oil minister, said that the
kingdom's production will continue at around 10 million barrels a
day, signaling that his country is determined to ride out the price
slide without making any output cuts.
Members of the Organization of the Petroleum Exporting
Countries, and particularly Saudi Arabia, have no intention of
drastically reducing oil production, knowing that this won't alter
total oil supply, as non-OPEC countries such as the U.S. and Canada
would quickly step in to fill the gap, ABN Amro said.
"In other words, the OPEC would merely lose market share without
achieving its objective of raising oil prices," it said. The bank
said the ideal oil price is somewhere around $80 a barrel but
reaching this equilibrium will be a prolonged process with great
volatility.
ABN Amro expects oil prices to test new lows before recovering
by year-end to around $60-$65 a barrel.
Meanwhile, Petroleum giant Royal Dutch Shell PLC has agreed to
buy BG Group PLC for GBP47 billion ($69.6 billion) in cash and
shares, the latest sign of how tumbling energy prices are shaking
up the global oil-and-gas industry.
Nymex reformulated gasoline blendstock for May--the benchmark
gasoline contract--fell 2.3% to $1.8182 a gallon, while ICE gasoil
for April changed hands at $539.50 a metric ton, down $1 from
Tuesday's settlement.
Eric Yep and Summer Said contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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