U.S. crude oil slumps
below $50 after stocks build
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[March 09, 2017]
By Christopher Johnson
LONDON
(Reuters) - Oil prices fell more than 2 percent on Thursday, extending
the biggest falls this year as record U.S. crude inventories kept
sentiment weak, pointing to a global glut despite supply cuts.
Crude oil stocks in the United States, the world's top oil consumer,
surged last week to 528.4 million barrels, an all-time high and up 8.2
million barrels in a week, well above forecasts of a 2 million barrel
build. [EIA/S]
The surge in U.S. inventories came despite an agreement by the
Organization of the Petroleum Exporting Countries and other exporters to
cut output by almost 1.8 million barrels per day (bpd) in the first half
of 2017.
"U.S. oil stockpiles have gained around 50 million barrels since the
start of the year, raising some doubts over the effectiveness of OPEC
cuts," said Hamza Khan, head of commodities strategy at ING Bank in
Amsterdam.
Brent crude oil was down $1.05 a barrel at $52.06 by 1100 GMT, after
reaching an intraday low of $51.60, its lowest since Dec. 1. On
Wednesday, Brent fell $2.81 a barrel, or 5 percent, in its biggest daily
price move this year.
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U.S. light crude reached an intraday low of $48.79, down $1.49, before
recovering slightly to trade around $49.20 a barrel. WTI plummeted 5.38
percent on Wednesday.
"The market went into a meltdown yesterday," said Tamas Varga, analyst
at London brokerage PVM Oil Associates. "The risk is now tilted to the
downside. Lower numbers are not a foregone conclusion yet, but bears are
in control."
Major oil exporters say they will gradually tighten global supplies as
they reduce production.
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![](../images/030917pics/busine55.jpg)
Pump jacks drill for oil
in the Monterey Shale, California, U.S. on April 29, 2013.
REUTERS/Lucy Nicholson/File Photo
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Kuwait's oil minister has said OPEC's compliance with cuts has exceeded
targets.
Kuwait will host a meeting on March 26 of OPEC and non-OPEC ministers to
review compliance with the production cuts.
OPEC hopes it can persuade other oil producers to make deeper cuts to
try to push up prices that have been below some breakeven costs for more
than two years.
But they will need to act fast, because low oil prices encourage
producers to increase output to balance their budgets.
"If things stay unchanged, then this week will be worst week for oil
prices since the OPEC deal (in November)," said Olivier Jakob, managing
director of Swiss consultancy Petromatrix. "If a quick rebound cannot be
organized by the end of the week, then banks will start to revise lower
their oil price forecasts."
(Additional reporting by Jane Chung in Seoul; editing by Jason Neely and
Susan Thomas)
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