Oil trades near six-year low amid surging US crude stockpiles

Oil tumbled to near a six-year low on Jan 28, 2015, as US crude stocks soared to a record high, sparking fresh fears over the growing global supply glut. -- PHOTO: AFP
Oil tumbled to near a six-year low on Jan 28, 2015, as US crude stocks soared to a record high, sparking fresh fears over the growing global supply glut. -- PHOTO: AFP

MELBOURNE (BLOOMBERG) - Oil traded near the lowest level in almost six years after government data showed US crude stockpiles expanded to the most in more than three decades.

Futures were little changed on Thusrday (Jan 29) after dropping 3.9 per cent on Wednesday. Crude supplies in the US, the world's biggest oil user, rose by 8.87 million barrels to 406.7 million last week, according to the Energy Information Administration (EI). That's the most in records compiled since August 1982. Output rose to the highest level in weekly EIA data.

The supply surge is bolstering speculation the global glut that drove prices almost 50 per cent lower in 2014 will persist. Saudi Arabia, the world's biggest exporter, will continue to keep output high to defend market share, according to Riyadh based Jadwa Investment, while the Organisation of Petroleum Exporting Countries is resisting calls to cut production.

West Texas Intermediate for March delivery was at US$44.43 a barrel in electronic trading on the New York Mercantile Exchange, down 2 US cents at 12.32pm Sydney time. The contract fell US$1.78 to US$44.45 on Wednesday, the lowest close since March 2009. The volume of all futures traded was about 55 per cent below the 100-day average.

Brent for March settlement rose 13 cents, or 0.3 per cent, to $US48.60 a barrel on the London-based ICE Futures Europe exchange. It slid US$1.13 to US$48.47 on Wednesday. The European benchmark crude was at a premium of US$4.19 to WTI.

Crude supplies at Cushing, Oklahoma, the delivery point for New York futures, increased for an eighth week to 38.9 million barrels through Jan 23, the EIA reported on Wednesday. That's the highest level since January 2014. Output has increased as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies in shale formations from Texas to North Dakota.