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Oil slides 4 percent on U.S. stock build, OPEC worry
December 2, 2015 / 12:12 AM / 2 years ago

Oil slides 4 percent on U.S. stock build, OPEC worry

Plants are pictured near an oil pump, owned by oil company Rosneft, in the settlement of Akhtyrskaya in Krasnodar region, southern Russia, December 21, 2014. REUTERS/Eduard Korniyenko

NEW YORK (Reuters) - Oil prices tumbled more than 4 percent on Wednesday as surging U.S. stockpiles and a rallying dollar prompted traders to dump crude contracts amid signs the world’s largest oil producers will not cut production when they meet this week.

Warmer-than-usual weather in the Northeastern United States, a major market for heating oil, also weighed on the petroleum complex.

U.S. crude’s West Texas Intermediate (WTI) futures hit contract lows after government data showed a 10th straight week in crude builds.

Brent futures approached new lows since March 2009, with the Organization of the Petroleum Exporting Countries (OPEC) widely expected to uphold at its meeting in Vienna on Friday a decision from last year to pump oil vigorously to protect market share from non-OPEC members like the United States and Russia.

The dollar’s .DXY surge to 12-1/2-year highs further pressured prices for oil and other commodities denominated in the greenback.[USD/]

“From the looks of it, we could be trading below $40 a barrel by the time OPEC concludes on Friday,” said Tariq Zahir at New York’s Tyche Capital Advisors, which is holding short positions in WTI through spread contracts.

Brent LCOc1 settled down $1.95, or 4.4 percent, at $42.49 a barrel. It hit a session low of $42.43, just 20 cents off from the 6-1/2-year low it struck in August.

WTI CLc1 finished the session down $1.91, or 4.6 percent, at $39.94, before returning to above $40 in post-settlement. Its low for the day was $39.84, a bottom for its front-month January contract CLF6.

Heating oil HOc1 fell almost 5 percent as Thomson Reuters Analytics data showed sharply reduced heating demand through mid-December.

U.S. crude oil inventories rose 1.2 million barrels last week, up for a 10th straight week, data from the Energy Information Administration (EIA) showed. Stocks of gasoline and distillates also rose.

“It is another data point pointing to a continued glut in the U.S. markets for oil as production declines remain stubborn even with oil prices hovering at current levels for a significant amount of time now,” Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland said.

Inventories at the Cushing, Oklahoma, delivery hub for U.S. crude futures USOICC=ECI accounted for a third of the build, the EIA reported.

Some traders said the market could be volatile for the rest of the week and that short-covering could occur as Brent and WTI both approach technically oversold levels.

The market will also watch U.S. jobs numbers for November which are due on Friday. A strong report could boost the dollar more by adding fuel to expectations that the Federal Reserve will hike U.S. interest rates.

Brent and WTI briefly turned positive during Wednesday’s session after a headline from Tehran’s oil ministry news agency Shana that a majority of OPEC members agree on output cuts. Prices fell back after the report also pointed out that OPEC kingpin Saudi Arabia was not agreeable to the reduction.

“The market is vulnerable to short covering spikes if anything unexpected on OPEC comes out,” said Peter Donovan, broker at Liquidity Energy in New York.

Additional reporting by Simon Falush in London and Henning Gloystein and Swetha Gopinath in Singapore; Editing by Marguerita Choy

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