By Nicole Friedman And Georgi Kantchev
Oil prices slid Wednesday after an industry group reported a
massive build in U.S. crude-oil inventories last week.
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 ample
supplies from the world's biggest oil producers.
Light, sweet crude for May delivery fell $1.11, or 2.1%, to
$52.86 a barrel on the New York Mercantile Exchange.
Brent oil prices traded down 92 cents, or 1.6%, to $58.18 a
barrel on ICE Futures Europe.
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 U.S. Energy Information
Administration will release official supply data at 10:30 a.m. EDT
on Wednesday. Analysts polled by The Wall Street Journal expect
crude stockpiles to increase by 3.4 million barrels.
U.S. inventories are already running at the highest level in
more than 80 years as production has stayed near multi-decade highs
despite the decline in the number of oil-drilling rigs in the
U.S.
In some past weeks, the EIA has reported a stockpile build that
was larger than expected but smaller than forecast by the API,
causing prices to rally.
Last week's EIA report showed the first week-on-week drop in
production since January, which boosted prices.
When the report is released, "should U.S. crude-oil production
have fallen again, oil prices would be likely to increase" to $55 a
barrel for the U.S. benchmark and $60 a barrel for Brent,
Commerzbank said in a note.
However, global supplies appear set to continue growing. 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 Tuesday 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.
Output has recently increased in Russia and Libya, according to
a note from brokerage PVM. "The fall in shale-oil production is
being overwhelmed by increases elsewhere," PVM analysts wrote.
Members of the Organization of the Petroleum Exporting
Countries, and particularly Saudi Arabia, have no intention of
reducing oil production because non-OPEC countries such as the U.S.
and Canada would quickly ramp up output to fill the gap, ABN Amro
said.
"In other words, OPEC would merely lose market share without
achieving its objective of raising oil prices," it said. 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 about $70 billion , the latest sign of how
tumbling energy prices are shaking up the global oil-and-gas
industry.
Gasoline futures fell 2.5% to $1.8145 a gallon. Diesel futures
slid 1.3% to $1.7604 a gallon.
Write to Nicole Friedman at nicole.friedman@wsj.com and Georgi
Kantchevat georgi.kantchev@wsj.com
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