Oil slumps below $45 on speculation US crude stockpiles will increase

On Tuesday oil traded below $45 a barrel, influenced by speculation that U.S. crude stockpiles will increase and a prediction from OPEC’s fifth-largest member that prices will not rebound soon.

In New York futures fell as much as 4.1 percent, declining for a third day. Crude inventories probably gained by 1.5 million barrels last week, a Bloomberg News survey showed before government data tomorrow.

West Texas Intermediate for February delivery decreased as much as $1.87 to $44.20 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since April 2009. The contract was at $44.70 at 1:39 p.m. London time. The volume of all futures traded was more than double the 100-day average for the time of day.

Brent for February settlement slid as much as $2.24, or 4.7 percent, to $45.19 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude’s premium to WTI shrank to as little as 79 cents, the narrowest since July 2013.

Because the U.S. pumped at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries (OPEC) resisted calls to cut production, oil dropped almost 50 percent last year, the most since the 2008 financial crisis.

Goldman Sachs Group Inc. supposed crude needs to drop to $40 a barrel to “re-balance” the market, while Societe Generale SA also reduced its price forecasts.

U.S. crude stockpiles probably rose to 383.9 million barrels in the week ended Jan. 9, according to the median estimate in the Bloomberg survey of six analysts before the Energy Information Administration’s report. Supplies have climbed to almost 8 percent above the five-year average level for this time of year, data from the Energy Department’s statistical arm show.

Through Dec 12, production accelerated to 9.14 million barrels a day, the most in weekly EIA records that started in January 1983. America's oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

As EIA data showed yesterday, oil production from the seven most prolific U.S. fields will expand in February by the slowest rate in nine months as drillers cut spending in response to the lowest crude prices in 5 1/2 years.

The U.A.E. plans to boost its production capacity to 3.5 million barrels a day in 2017, Al Mazrouei said in a presentation in Abu Dhabi yesterday. The country currently has a capacity of 3 million and pumped 2.7 million a day last month, according to data compiled by Bloomberg.

OPEC nations can withstand a drop in crude prices while “those who are producing the most expensive oil, the rationale and the rules of the market say that they should be the first to pull or reduce their production,” Al Mazrouei told reporters today.

OPEC, whose 12 members supply about 40 percent of the world’s oil, agreed to maintain its collective output target at 30 million barrels a day at a Nov. 27 meeting in Vienna. Qatar estimates the global surplus at 2 million barrels a day.

In China, the world’s biggest oil consumer after the U.S., crude imports jumped to a new high in December, hitting a record for last year, as Bloomberg informs.

Overseas purchases rose 19.5 percent from the previous month to 30.4 million metric tons, according to preliminary data from the General Administration of Customs in Beijing today. For 2014, imports climbed 9.5 percent to 310 million tons, or about 6.2 million barrels a day.