Oil falls as record US crude supplies rise

Oil dropped after government data showed that US crude stockpiles rose to a record, offsetting Opec’s efforts to drain a global glut.

Crude supplies climbed 1.5 million barrels to 520.2 million barrels, the highest in weekly data going back to 1982. A 3-million-barrel supplies gain was projected by analysts surveyed by Bloomberg before the Energy Information Administration report. Compliance among the 10 Opec members that pledged to cut production rose to 89 per cent, while gains from other members meant total output rose slightly, consultant JBC Energy said.

As the Organisation of Petroleum Exporting Countries and 11 non-member nations work to reduce supply to end a three-year glut, US producers are ramping up, sowing speculation they may fill the gap. That has so far subdued price swings, sending the Chicago Board Options Exchange Crude Oil Volatility Index on Monday to the lowest since October 2014.

“The market’s still in a struggle between Opec cuts and the reality that there’s a lot of oil in storage here,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “We need to start seeing supply declines here pretty soon or the market will be in trouble.”

West Texas Intermediate for April delivery slipped 18 cents, or 0.3 per cent, to close at $53.83 a barrel on the New York Mercantile Exchange. Futures bounced between $51.22 and $54.94 in February, the tightest range since August 2003.

Brent for May settlement declined 15 cents, or 0.3 per cent, to $56.36 a barrel on the London-based ICE Futures Europe exchange. The April contract dropped 0.6 per cent to expire at $55.59 on Tuesday.