Oil declined from the highest price in seven weeks in New York on estimates that U.S. crude inventories advanced from a record level last week.
West Texas Intermediate futures dropped 2.6 percent, erasing Tuesday’s 1.4 percent gain. Stockpiles probably climbed by 3 million barrels through Feb. 13, according to a Bloomberg News survey before an Energy Information Administration report Thursday. Supplies increased the prior five weeks in a row to 417.9 million barrels, the most in weekly records begun 1982.
U.S. oil production remains at its highest level in at least three decades even as companies idled a record number of oil rigs in response to last year’s 46 percent plunge in prices. While WTI has rebounded more than 15 percent from this year’s low, the gains will dissipate as U.S. output expands, according to UBS Group AG, Bank of America Corp. and Commerzbank AG.
“The idea that we are expecting another build in U.S. stockpiles seems to cut short another attempt by the market to pick its head up,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “If we don’t see any kind of pullback in U.S. production, the fears that drove us down below $50 are going to re-emerge.”
West Texas Intermediate for March delivery declined $1.39 to end at $52.14 a barrel on the New York Mercantile Exchange. The contract closed at $53.53 on Tuesday, the highest settlement since Dec. 30. The volume of all futures traded was 9 percent above the 100-day average.
Brent for April settlement fell $2 to $60.53 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude ended at a premium of $7.71 to April WTI.
“There’s a price correction after some huge upward moves yesterday,” Amrita Sen, chief oil analyst at researcher Energy Aspects Ltd., said by e-mail from London. “In the short term, U.S. tight oil output may continue to rise because even though the rig count is decreasing, companies are moving rigs from unprofitable plays to the core.”
U.S. oil explorers idled rigs for the 10th straight week to extend an unprecedented retreat in drilling. The rig count fell by 84 to 1,056 last week, the lowest since August 2011, according to Baker Hughes Inc.
The cut would need to be deeper to halt growth in output, according to Goldman Sachs Group Inc. The increasing efficiency of drillers and lower costs combined with moving rigs to the most productive areas mean the nation’s output won’t decline, Bank of America estimates.
“We still have a 1-million-barrel-a-day gap between demand and production,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $126 billion of assets, said by phone. “We have amazingly high U.S. oil stocks.”
U.S. production is still rising. The EIA forecast that output will increase to 9.3 million barrels a day this year, the most since 1972, from 8.63 million last year.
Saudi Arabia, the world’s biggest crude exporter, shipped 5.7 percent less oil overseas last year led by a decline in consumption in China, its biggest customer in Asia, in a sign the price rout did little to revive demand.
Shipments averaged 7.11 million barrels a day, down from an 11-year high of 7.54 million barrels a day in 2013 and the lowest in three years, according to data from the Joint Organisations Data Initiative. In December, exports dropped 5 percent from November to 6.9 million barrels a day.
The Organization of Petroleum Exporting Countries produced 30.9 million barrels a day of oil in January, exceeded its output quota of 30 million for an eighth month, according to data compiled by Bloomberg.
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