Prices dropped 2.2 percent. Analysts surveyed by Bloomberg projected that an Energy Information Administration report on Wednesday will show that crude supplies rose by 1.5 million barrels last week. Futures climbed earlier as Russia, Iraq, Kazakhstan and Azerbaijan said they’re implementing output curbs in accordance with last year’s accord, echoing a statement by Kuwait on Monday that Gulf producers are making their required curbs.
Oil last year capped its biggest annual gain since 2009 as the Organization of Petroleum Exporting Countries and 11 other nations agreed to curb output starting Jan. 1 in an effort to trim a global inventory glut. The price increase is also luring non-OPEC producers back into the market. U.S. crude production is projected to rise this year as drillers return to shale fields, according to EIA report Tuesday.
“From now through March we should see crude inventories climb,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $6.1 billion, said by telephone. “This is a show-me market, we want to see the OPEC cuts. The major reason OPEC was so intent on getting an agreement were fears that prices would collapse in the first and second quarters and revisit last year’s lows.”
West Texas Intermediate for February delivery slipped $1.14 to $50.82 a barrel on the New York Mercantile Exchange. It was the lowest close since Dec. 7. Total volume traded was 15 percent above the 100-day average at 3:05 p.m.
Brent for March settlement fell $1.30, or 2.4 percent, to $53.64 a barrel on the London-based ICE Futures Europe exchange. It was also the lowest close since Dec. 7. The global benchmark crude ended the session at a $1.94 premium to March WTI.
The U.S. will pump 9 million barrels a day of crude this year, up from 8.78 million projected in December, the EIA said in its monthly Short-Term Energy Outlook. That’s up from 8.89 million barrels in 2016. Output is projected to increase to 9.3 million barrels a day for 2018.
U.S. crude inventories are at the highest seasonal level in more than three decades, according to weekly data compiled by the EIA since 1982. Supplies dropped by 7.05 million barrels in the week ended Dec. 30, the agency reported last week. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, probably increased by 300,000 barrels last week, according the Bloomberg survey.
“We’re in wait-and-see mode,” Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by telephone. “I think the market has a soft floor at $50 as long as OPEC appears to be progressing. The Saudis and other core countries have said they’re implementing the cuts, while we have mixed signals from Iraq.”
Iraq has reduced its oil production by 160,000 barrels a day and will comply with its pledge to cut output to 210,000 by the end of the month, Oil Minister Jabbar Al-Luaibi said, even as ship loading data suggested that exports are set to increase next month.
OPEC’s second-biggest producer is poised to ship 3.64 million barrels a day of crude oil in February from its ports in southern Basra province, according to a loading program obtained by Bloomberg, more than its December average of 3.51 million barrels a day, a record high.
“I am a little leery about the Iraqis because just yesterday they also reported that their exports were at a record last month,”Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone.
- Kazakhstan cut January oil production by 20,000 barrels a day, fulfilling its obligation under the OPEC accord, the Energy Ministry said.
- Russian crude producers have started reducing output in line with the OPEC agreement, an energy ministry official said.
- Azerbaijan’s Energy Ministry said its output will fall 35,000 barrels a day as early as this month, in line with its commitment to OPEC
- Producers from Saudi Arabia, Russia and Iraq have announced cuts that account for the bulk of the deal reached last year, Kuwaiti Oil Minister Essam Al-Marzouk said Monday.