Oil prices decline as U.S. stockpiles set record

Oil slid for a third day as record-high U.S. crude stockpiles were seen jeopardizing OPEC’s efforts to drain a global surplus. Futures declined 1.2% in New York. While Saudi Arabia’s February crude shipments fell again, indicating OPEC’s top producer is cutting deeper than it pledged, U.S. stockpiles expanded by 1.5 MMbbl last week. Still, Citigroup said the increase in American inventories was “muted” compared with earlier gains and may peak as refineries restart after maintenance.

As OPEC and 11 other nations reduce supply in an effort to end a three-year glut, U.S. producers are ramping up and potentially offsetting the curbs. That has so far subdued price swings, sending the Chicago crude oil volatility index to the lowest since October 2014. While refinery demand has risen with easing seasonal maintenance, it could be a week or two before processing begins increasing steadily, according to Citigroup. For anyone with a bearish outlook “it is probably hard to resist hitting the sell button,” said Tamas Varga, an analyst at brokerage PVM Oil Associates in London. “Nationwide crude oil stocks are at their highest.” WTI for April delivery dropped $0.41 to $53.42/bbl on the NYME. Futures traded between $51.22 and $54.94 in February, the tightest range since August 2003. Prices dropped $0.18 to $53.83/bbl on Wednesday. Total volume traded was about 9% below the 100-day average.

Inventory Gains

Brent for May settlement fell $0.39 to $55.97/bbl on the ICE Futures Europe exchange. Prices declined $0.15 to $56.36 on Wednesday. Brent traded at a $2.12 premium to May WTI. U.S. oil inventories last week rose to 520.2 MMbbl, the most in weekly data going back to 1982. They have increased by more than 41 MMbbl since the start of the year. Supplies at Cushing, Oklahoma, the delivery point for WTI, gained 495,000 bbl to 63.5 million last week. The nation’s crude production was 31,000 bbl higher at 9.03 MMbpd, the EIA reported Wednesday.

Saudi Arabia, the world’s biggest crude exporter, shipped 7.04 MMbpd in February, a drop of 126,000 bpd from January, vessel-tracking data compiled by Bloomberg show. Measured against the country’s own figures, outflows are down by about 1 MMbpd since December.

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