Oil halted losses after the biggest drop in more than a year as record U.S. crude stockpiles began to raise doubts about the effectiveness of OPEC-led efforts to ease a global glut.
Futures gained as much as 0.9 percent in New York after losing 5.7 percent the previous three sessions and threatening to slip below $50 for the first time since December. Stockpiles rose 8.2 million to the highest level in weekly government data since 1982. Saudi Arabia’s Oil Minister Khalid Al-Falih said this week global inventories are falling slower than expected, opening the door to extend an output-cut deal beyond its initial six months.
Oil has fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and other nations started trimming supply for six months starting Jan. 1 to reduce a global glut. While U.S. shale production has rebounded, larger-than-expected cuts elsewhere and signs of growing demand suggest stockpiles will decline, according to Goldman Sachs Group Inc.
“It’s very clear that U.S. producers are jumping into the gap left by the cut in OPEC output,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “If oil prices drop back to the low $40s, I expect the OPEC agreement to fall apart in acrimony.”
West Texas Intermediate for April delivery added as much as 43 cents to $50.71 a barrel on the New York Mercantile Exchange and was at $50.54 as of 2:44 p.m. in Hong Kong. Total volume traded was about 16 percent above the 100-day average. The contract lost $2.86, or 5.4 percent, to $50.28 on Wednesday, the biggest decline in percentage terms since February 2016.
Brent for May settlement rose as much as 54 cents, or 1 percent, to $53.65 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.81, or 5 percent, to $53.11 on Wednesday. The global benchmark crude traded at a premium of $2.41 to May WTI.
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U.S. crude production increased for a third week to 9.09 million barrels a day, the Energy Information Administration said Wednesday. The nation’s output is projected to surge to a record 9.73 million barrels a day next year, according to the EIA’s monthly Short-Term Energy Outlook on Tuesday.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, rose a second week to 64.4 million barrels, the EIA reported. Production from Libya’s Waha Oil Co., a venture between the nation’s state oil company and foreign partners, may be suspended as clashes in the country’s east keep the main export terminals out of service.