Brent crude oil fell below $60 a barrel yesterday as oversupply, supported by record-high US crude stocks, weighed on the market.
US crude inventories rose 7.7 million barrels to 425.6 million last week, rising for a sixth straight week to record highs, data from the Energy Information Administration (EIA) showed on Thursday.
Stockpiles of West Texas Intermediate (WTI) US crude at the Cushing oil hub in Oklahoma rose the most in six years, the EIA said.
“With total crude stocks now about 425 million barrels and Cushing north of 46 million barrels, WTI is looking increasingly mispriced high above $52 per the April contract,” said Jeffries Futures analysts in a note to traders.
We will reiterate a substantial lag time of months before the rig numbers begin to force a levelling in output
Brent crude futures for April were down 27 cents at $59.94 by 0915 GMT, having hit an intraweek low of $57.80 in the previous session.
US crude for March delivery CLc1 was down 24 cents at $50.92. The contract expired yesterday.
Trading was quiet in Asian hours as China and other countries were closed for the Lunar New Year holiday.
While swelling US crude inventories tend to soften prices, falling US rig numbers support oil as they signal supply reduction.
The number of rigs drilling for oil in the United States fell to its lowest since August 2011 last week.
“I assume we’re going to continue to see another big fall [in rig numbers] and that’s going to provide support for the market,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.
But Jeffries Futures analysts said a rise in oil prices on falling rig numbers would be premature:
“Although the market could receive another pre-weekend boost from a plunge in rig counts, we will reiterate a substantial lag time of months before the rig numbers begin to force a levelling in output.”
Expectations of continued oversupply were supported by rising production levels from top oil exporter Saudi Arabia.
Barclays oil analyst Miswin Mahesh said exports from Saudi Arabia could reach 9 million barrels per day next year as it focuses on protecting market share.
“It is uniquely positioned relative to other oil producers in a highly competitive market,” he said.