Oil’s global glut will be prolonged as US stockpiles see their longest run of gains in seven months.
Futures are down 1.7|% this week after falling below $40 a barrel Wednesday for the first time since August.
US crude inventories expanded for an eighth week, leaving supplies more than 100 million barrels above the five-year average level for this time of year, US government data showed this week.
“The world is awash in oil,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “Prices should continue to grind lower until we start to see a drop-off in inventories.”
Crude has slumped about 47% in the past year amid speculation a surplus will persist as the Organization of Petroleum Exporting Countries, threatened by surging output mainly from North America and Russia, continues to pump above its quota.
Saudi Arabia is working with producers inside and outside the 12-member group to stabilize the market, Saudi Oil Minister Ali al-Naimi said in Bahrain Thursday.
West Texas Intermediate for December delivery, which expires Friday, fell 54 cents, to $40 a barrel yesterday. The contract touched $39.88, the lowest intraday level since August 27. The more-active January futures slipped 20 cents to $41.52.
Brent for January settlement advanced 6 cents to $44.24 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $2.72 premium to January WTI.
US crude stockpiles expanded to 487.3 million barrels in the week ended November 13, according to Energy Information Administration data. Refinery rates rose while inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, increased for a second week to 56.9 million barrels.
“With crude stocks having increased all through summer and autumn, the seasonal crude stock-building period that is the first quarter is due to arrive at a time of record-high stocks,” David Wech, an analyst at consultants JBC Energy GmbH in Vienna, said in a report.
“The number of people looking at further outright price declines is clearly on the rise.”
The global economy is going through an unstable period, Saudi Arabia’s al-Naimi said Thursday. Crude demand is expected to rise by 1 million barrels a day every year in this decade, and the world requires more investments in oil to compensate for declining recovery rates, he said.