NEW YORK (MarketWatch) — Crude-oil futures slumped Thursday, reversing the previous day’s gains, as the Kuwaiti oil minister stoked supply fears.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK5, -3.62% traded at $45 a barrel, down $1.65 or 3.6%. May Brent LCOK5, -2.86% crude on London’s ICE Futures exchange fell $1.43, or 2.5%, to $54.48 a barrel.
Renewed pressure was seen as Ali al-Omair, the Kuwaiti oil minister said the Organization of the Petroleum Exporting Countries, or OPEC, had no choice but to maintain production levels “because we don’t want to lose our share in the market,” according to news reports.
Oil prices had risen in the last trading session, with Nymex West Texas Intermediate crude snapping a six-session losing streak after the U.S. Federal Reserve said it was in no hurry to raise interest rates.
But the oil glut continues to weigh on prices.
Overall, U.S. oil stockpiles rose more than expected, by 9.6 million barrels to 458.5 million barrels last week, the U.S. Energy Information Administration said. At the oil-storage hub of Cushing, Okla. it rose by 2.9 million barrels, nearing full capacity though not quite there yet.
However, analysts at French bank Société Générale said the rate of increasing oil stocks at Cushing, and for the U.S. overall, should start to ease in April or May.
WSJ market wrap: March 18, 2015
U.S. stocks and bonds rallied, while the dollar slumped, after the Federal Reserve signaled a more cautious approach to raising interest rates than investors had expected.
“For the U.S. as a whole, crude storage capacity is only 63% full, with 192 million barrels of space remaining,” SocGen says, adding that there is more storage space remaining in caverns and tanks than was previously thought.
Société Générale has revised its oil price forecasts, and expects ICE Brent crude to average $1.33 higher at $51.33 a barrel in the second quarter, and Nymex WTI crude to average $2 lower at $45 a barrel.
Debt in the oil sector: Meanwhile, the Switzerland-based Bank for International Settlements said in its quarterly review that one key reason for the sharp drop in oil prices has been the high level of debt piling up in the oil sector.
“The total debt of the oil and gas sector globally stands at roughly $2.5 trillion, 2½ times what it was at the end of 2006,” the author, adding that debt levels of energy firms rose faster than in other sectors.
As a result, oil companies were forced to increase or maintain high oil production even when prices fell to stay liquid. They also had to increase hedging in derivatives markets against further oil price drops, BIS said.
Nymex reformulated gasoline blendstock for April RBJ5, -2.30% — the benchmark gasoline contract — fell 3.3 cents, or 1.8%, to $1.769 a gallon.
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.