Price not hit bottom – Greenspan
A RECORD surplus in US crude inventories might soon strain the nation’s storage capacity, renewing a slump in prices and curbing its output, according to the International Energy Agency (IEA).
The IEA boosted estimates for US oil production this year as cutbacks in drilling rigs have so far failed to slow its output. Crude inventories threatened to fill tanks, with the nation’s largest oil-storage hub in Cushing, Oklahoma, 70 percent full, the agency said. The IEA raised its 2015 estimate of global oil demand by the most since it was introduced in July.
“Stocks may soon test storage capacity limits,” said the Paris-based adviser to 29 nations in its monthly market report. “That would inevitably lead to renewed price weakness, which in turn could trigger the supply cuts that have so far remained elusive.”
Oil has rallied about 20 percent in London over the past two months as US drillers idled an unprecedented number of rigs in response to the biggest price collapse since 2008. Crude slumped 61 percent from June to January after Opec signalled it would leave shale producers and other suppliers to deal with a global glut.
West Texas Intermediate crude, the US benchmark, fell $1.69 (R21), or 3.6 percent, to $45.36 a barrel at 11.17am on the New York Mercantile Exchange. Brent, the international benchmark, dropped $1.02 to $56.06 a barrel. Both grades are heading for weekly declines.
Steep revision
“The market moved lower on the back of the report,” Ole Hansen, an analyst at Saxo Bank, said. “Continuing inventory builds are keeping the focus THE PRICE of crude oil had not reached a bottom yet as production kept increasing, former Federal Reserve chairman Alan Greenspan said last week.
The slump in oil prices had not curtailed output, and there was a huge amount bottled up in the US, Greenspan said on Friday. Inventories at Cushing, Oklahoma, the delivery point for US benchmark futures, would keep rising, he said.
“We are probably at the point now, where at the current rate of fill, we are going to run out of room in Cushing by next month,” he said.
“Until we find a way to get out of this dilemma, prices will continue to ease.”
West Texas Intermediate futures dropped 1.9 percent to $46.17 a barrel as of 9.31am on Friday on the New York Mercantile Exchange. Prices are down almost 60 percent from their June peak.
US crude stockpiles increased for nine weeks to March 6 to 448.9 million barrels, the highest in Energy Information Administration (EIA) records dating back to August 1982. The nation pumped 9.37 million a day last week, the fastest pace in weekly estimates compiled by the Energy Department’s statistical arm.
Stockpiles at Cushing rose by 2.32 million barrels to 51.5 million last week, the highest level since January 2013.
Cushing has a working capacity of 70.8 million barrels, according to the EIA.
The surplus might soon strain US storage capacity, renewing a on whether storage may fill up. It’s becoming increasingly clear that, barring any major geopolitical event, the risks are pointing to lower oil prices.”
US oil supply would expand this year by about 750 000 barrels a day to 12.56 million a day, up from a projection of 12.41 million in last month’s report. The agency boosted estimates for North American output in the fourth quarter of 2014 by a “steep” 300 000 barrels a day. The slump in prices and curbing its output, the International Energy Agency (IEA) said in a report on Friday. The IEA boosted estimates for US oil production this year as cutbacks in drilling rigs have so far failed to slow output.
Drillers had idled 653 rigs since the start of December, data from Baker Hughes showed. The number of active machines seeking oil was 922 as of March 6, the lowest since April 2011, the services company said.
“The rigs that have been closing down have not been affecting the capacity to produce crude,” Greenspan said. “You are getting the inefficient rigs shutting down, but the capacity to basically build oil expansion remains there.” – Bloomberg production forecasts included natural gas liquids and condensate, according to the IEA.
“While the US supply response to lower prices might take longer to kick in than expected, it might also prove more abrupt,” the agency said.
The nation held 468 million barrels of oil in storage at the end of January, a record 72 million higher than the five-year average, the IEA said. – Bloomberg