Oil traded near the lowest price since February 2009 as U.S. crude inventories surged and the Federal Reserve raised interest rates for the first time in almost a decade.
Futures were little changed in New York after losing 4.9 percent Wednesday. Stockpiles climbed by 4.8 million barrels to 490.7 million last week, the highest level for this time of year since 1930, the Energy Information Administration reported. The Federal Open Market Committee unanimously voted to increase rates for the first time in a decade, bolstering the dollar Thursday.
Oil is trading near levels last seen during the global financial crisis amid signs a record surplus will worsen. The Organization of Petroleum Exporting Countries earlier this month effectively abandoned production limits to defend market share, while the White House on Wednesday announced its support for a deal reached by congressional leaders that would end the nation’s 40-year restrictions on crude exports.
“Expanding stockpiles is a strong bearish element as this time of the year is when supplies are supposed to shrink on high demand for oil products,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone. “Lifting of the export ban may flip the Brent-WTI spread, but it won’t have a direct impact on prices as it doesn’t mean output will also rise.”
West Texas Intermediate for January delivery was at $35.37 a barrel on the New York Mercantile Exchange, down 15 cents, at 12:36 p.m. Seoul time. The contract fell $1.83 to $35.52 on Wednesday, the lowest close since February 2009. Total volume was about 16 percent below the 100-day average. Prices have dropped 34 percent this year, set for a second annual decline.
U.S. Supplies
Brent for February delivery slid 23 cents to $37.16 a barrel on the London-based ICE Futures Europe exchange. The January contract expired Wednesday after decreasing $1.26 to $37.19, the lowest close since December 2008.
Brent, the European benchmark crude, was at a premium of 52 cents a barrel to WTI for February, the least since January. The spread has narrowed amid speculation the plan to allow domestic crude to be shipped overseas may help alleviate the nation’s supply glut. U.S. crude inventories have swelled to 130 million barrels above the five-year seasonal average, EIA data showed.
Oil prices are also lower as the dollar’s advance damped the investment appeal of commodities. The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, gained as much as 0.5 percent to a two-week high.
“As the market generally expects another rate increase in March, oil prices will most likely stay low at least until the first quarter,” said Kang Yoo Jin, a commodities analyst at NH Investment & Securities Co. in Seoul.
First Published December 17, 2015, 6:50 a.m.
