Oil fell for a fourth day, extending losses from the lowest close in more than five and half years as the United Arab Emirates and Kuwait predicted a global supply glut will persist to at least the second half of 2015.
Futures dropped as much as 1.5% in New York.
The market may recover only when demand improves later this year, Ali Al Yabhouni, the UAE’s governor to the Organization of Petroleum Exporting Countries, said yesterday.
Crude stockpiles in the US, the world’s biggest oil consumer, probably expanded further above seasonal levels last week, a survey shows before a government report today.
Oil slumped almost 50% last year, the most since the 2008 financial crisis, as OPEC resisted calls to cut production even as the US pumped at the fastest rate in more than three decades.
WTI briefly traded higher than Brent yesterday for the first time since July 2013, a signal that Saudi Arabia’s strategy of curbing shale output growth is working, according to Societe Generale SA.
“It’s a game of poker and someone will eventually fold,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said.
“If prices continue to drive lower, cracks will start to appear. Oil at $35 is not good for anyone.”
Oil is leading a collapse in commodities after a decade-long bull market led companies to boost production and a stronger dollar diminished their allure to investors.
The Bloomberg Commodity Index of 22 energy, agriculture and metal products slid to the lowest level since August 2002 today after decreasing 17% last year.
The drop is lowering expectations for inflation, raising the prospect of weakening consumer prices and tempering speculation that central banks around the world will start boosting interest rates.
Oil’s decline makes it increasingly uncertain whether the Bank of Japan will reach its 2% inflation target in the coming fiscal year, according to people familiar with the central bank’s discussions.
West Texas Intermediate for February delivery fell as much as 68 cents to $45.21 a barrel in electronic trading on the New York Mercantile Exchange and was at $45.25 at 2:44 p.m. Singapore time.
The contract lost 18 cents to $45.89 yesterday, the lowest close since April 2009. The volume of all futures traded was about 50% above the 100-day average.
Brent for February settlement dropped as much as 76 cents, or 1.6 percent, to $45.83 a barrel on the London-based ICE Futures Europe exchange.
The contract, which expires tomorrow, traded at a premium of 61 cents to WTI. The more-active March future was 79 cents lower at $47.03.
US shale producers will be the first to curb output amid the price slump, UAE Energy Minister Suhail Al Mazrouei said yesterday, adding to rhetoric from Middle East OPEC members aimed at hastening oil’s slide and countering supply from elsewhere.
The group, which pumps about 40% of the world’s oil, agreed to maintained its collective target at 30 million barrels a day at a November 27 meeting in Vienna.
Increased global economic growth will be needed to absorb a glut estimated at 1.8 million barrels a day, according to Kuwait Oil Minister Ali Al-Omair.
WTI will drop below $40 a barrel as the market continues to “price in huge oversupply” over the first half of this year, Mike Wittner, the head of research at Societe Generale in New York, said on January 12.
US crude inventories probably rose to 384.1 million barrels in the week ended January 9, according to the median estimate in the Bloomberg survey of eight analysts before the Energy Information Administration report.
Supplies have climbed to almost 8% above the five-year average level for this time of year, said the Energy Department’s statistical arm.
Production accelerated to 9.14 million barrels a day through December12, the most in weekly EIA data that started in January 1983.
The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.
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