By Nicole Friedman
Oil prices extended their losses Wednesday after U.S. inventory
data showed the largest one-week build in crude supplies since
2001.
U.S. crude-oil stockpiles rose by 10.9 million barrels in the
week ended April 3, the U.S. Energy Information Administration said
Wednesday.
Inventories now sit at 482.4 million barrels, the highest level
on record in weekly data going back to 1982.
Light, sweet crude for May delivery recently fell $2.11, or
3.9%, to $51.87 a barrel on the New York Mercantile Exchange.
Brent, the global benchmark, fell $1.73, or 2.9%, to $57.37 a
barrel on ICE Futures Europe.
"There's simply not a shortage at all," said Kyle Cooper,
analyst at IAF Advisors in Houston. "There's a big glut, and that
glut remains intact."
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.
U.S. inventories are 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.
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.
Write to Nicole Friedman at nicole.friedman@wsj.com
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