Oil Falls Towards $61 as ample Supplies Weigh
LONDON – Oil fell towards $61 a barrel on Thursday as a further jump in U.S. crude stockpiles underlined currently ample supplies, countering indications of a coming recovery in global demand.
The U.S. government’s latest supply report released on Wednesday said domestic crude inventories rose last week to 434.1 million barrels, hitting a seasonal record high for the seventh week.
Brent crude LCOc1 fell 40 cents to $61.24 by 8.17 a.m. ET, after jumping more than 5 percent on Wednesday. U.S. crude CLc1 fell 96 cents to $50.03, following a more than 3 percent gain in the previous session.
“At present, it would appear that Brent is bottoming out at $60 per barrel,” said Carsten Fritsch, analyst at Commerzbank. “The renewed sharp rise in U.S. crude oil stocks … points to a market that is still oversupplied.”
Brimming U.S. crude supplies are increasing the discount at which U.S. crude is trading to Brent. The spread reached $11.81 on Thursday, the widest since January 2014.
Brent collapsed in 2014, falling from $115 reached in June on global oversupply. The decline deepened after the Organization of the Petroleum Exporting Countries (OPEC) chose to defend market share against rival supply sources, rather than cut its own output.
The price has rallied more than 35 percent from a near six-year low of $45.19 reached in January, supported by signs that lower prices are starting to reduce investment in U.S. and other non-OPEC supply.
A growing number of OPEC officials are making cautiously hopeful comments on the market outlook. This week, Saudi oil minister Ali al-Naimi said demand was showing signs of improving, while a Gulf OPEC delegate said demand would rise more strongly in the second half of 2015.
OPEC officials including Naimi had been making more bearish comments. The Saudi minister was quoted in December as saying OPEC would not cut output even if oil fell to $20.
“No more talk of $20 from al-Naimi,” said Olivier Jakob, oil analyst at Petromatrix. “Analysts calling for $20 a barrel oil will be more shy now.”