Oil traded below $31/bbl after U.S. crude stockpiles rose to the highest in more than eight decades as Saudi Arabia and Russia propose to freeze output amid a worldwide surplus.
Futures lost as much as 1.4% in New York, trimming the first weekly advance this month. U.S. supplies expanded to 504 MMbbl, the highest level in data going back to 1930, according to the Energy Information Administration. Iraq said Thursday it backs any decision to support prices and balance the market without indicating whether it would cap its own output.
“The market was caught by surprise by the rise in the U.S. inventories,” Jens Pedersen, a Danske Bank A/S analyst in Copenhagen, said by phone. “We need both adjustments on the supply side, for example producers scaling back on new investments which will lead to less supplies going forward,” and an improvement in demand, he said.
Crude is still down about 18% this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December amid swelling U.S. stockpiles and as Iran seeks to boost exports to regain market share after sanctions were lifted. Companies are confronting rating downgrades and oil-producing nations face bigger-than-expected withdrawals from wealth funds to cover budget deficits as energy revenues fall.
West Texas Intermediate for March delivery, which expires Monday, fell as much as 42 cents to $30.35/bbl on the New York Mercantile Exchange and was at $30.56 at 9:38 a.m. London time. Prices are up 3.8% this week. Total volume traded was about 2% below the 100-day average. The more-active April future was 1 cent lower at $32.92/bbl.
Brent for April settlement declined as much as 54 cents, or 1.6%, to $33.74/bbl on the London-based ICE Futures Europe exchange. Prices are 2.5% higher this week. The European benchmark crude traded at a premium of $1.36 to WTI for April.
Supplies at Cushing, Oklahoma, the biggest U.S. oil-storage hub, rose to a record 64.7 MMbbl, the EIA said in a report Thursday. The site, which is the delivery point for WTI, has a working capacity of 73 MMbbl.
Nationwide crude stockpiles increased by 2.15 MMbbl through Feb. 12, the EIA said. Inventories are at a record high in weekly data that started in August 1982. Supplies haven’t been at this level since 1930, based on monthly records dating back to 1920.
Santos Ltd., Australia’s third-largest oil and gas producer, fell as much as 8.8% after its full-year net loss widened and it posted A$3.9 billion ($2.8 billion) of writedowns.
Iran, OPEC’s second-biggest producer until sanctions were intensified in 2012, will delay the start date for sales of a new heavy oil grade until June to give buyers more time to test the crude in refineries. Saudi Arabia and Russia offered this week to freeze output near record levels as long as others follow.
Norway’s central bank governor stepped up his warning on excessive use of the nation’s oil income as he predicted the government may need to withdraw almost $10 billion from its wealth fund this year. In October, Western Europe’s biggest crude producer unveiled a budget using a record amount of oil wealth to support growth.