West Texas Intermediate oil dropped 2.7 percent after falling 4.6 percent last week. The number of oil rigs in the U.S. fell by 37 to 1,019 last week, data from Baker Hughes Inc. showed Friday. It was the smallest cut in seven weeks. Prices pared losses after Nigeria’s oil minister was reported by the Financial Times to have said that OPEC members have discussed holding an emergency meeting.
Rising supply is contributing to a global surplus that drove crude down by almost half in 2014. OPEC has signaled that it’s prepared to let prices fall to a level that would force surging U.S. output to slow. American crude inventories and production expanded to the highest level in more than three decades, government data showed last week.
“The market is getting hammered again,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “We’re going to continue to see substantial supply builds. The price is about to come under additional downward pressure because of supply and demand.”
WTI for April delivery decreased $1.36 to $49.45 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Feb. 11. The March contract expired on Friday after falling 82 cents to $50.34. The volume of all futures traded was 46 percent above the 100-day average at 3:07 p.m.
Brent for April settlement fell $1.32, or 2.2 percent, to end the session at $58.90 a barrel on the London-based ICE Futures Europe exchange. Volume was up 15 percent from the 100-day average The European benchmark crude closed at a $9.45 premium to WTI.
Nigerian Petroleum Minister Diezani Alison-Madueke said OPEC members have discussed calling an emergency meeting if crude continues to fall, according to an interview in the Financial Times.
“The Nigeria headline would explain the rebound,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “I think reaction will be limited. We need to hear from a Gulf country before this is taken seriously, not Nigeria, Venezuela or Libya.”
Oil fields in eastern Libya resumed pumping to the port of Hariga after a pipeline was repaired, according to state-run National Oil Corp. The link running from the Mesla and Sarir fields to the port reopened Sunday, Mohamed Elharari, a National Oil spokesman, said by phone from Tripoli. Libya, reduced to OPEC’s smallest producer by turmoil, pumped 300,000 barrels a day in January, according to Bloomberg data.
“There is still an imbalance between supply and demand,” Jean Medecin, a London-based member of the investment committee at Carmignac Gestion SA, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “Probably in less than six months global storage capacity will be filled.”
U.S. crude supplies rose to 425.6 million in the week ended Feb. 13, the most in records compiled since 1982 by the Energy Information Administration. Stockpiles at Cushing, Oklahoma, delivery point for WTI traded in New York, climbed to 46.3 million, the highest since July 2013.
Refineries operated at 88.7 percent of their capacity in the seven days ended Feb. 13, down 1.3 percentage point from the prior week, EIA data shows. U.S. plants typically schedule work for late winter and early spring, when they move from maximizing distillate output to producing gasoline.
“We’re coming to a point before long where it will be hard to find a place to store some of this oil,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “We’re going into refinery maintenance season and there’s the strike.”
The U.S. United Steelworkers union plans to restart talks this week to resolve the nation’s largest oil workers’ strike since 1980, according to two people familiar with the talks. The union, representing workers at more than 200 refineries, fuel terminals, pipelines and chemical plants across the country, has rejected seven contract offers from Royal Dutch Shell Plc, which is bargaining on behalf of the refiners.
The strike, which started Feb. 1 at nine sites from California to Texas, has expanded to 12 refineries and 3 other facilities. A deal would end a strike at plants that account for almost 20 percent of the country’s refining capacity.
“The strike has the potential to further reduce crude demand,” Kilduff said. “This will help further build supply.”
Diesel jumped to the highest level in almost three months on speculation that refinery upsets will interrupt shipments as demand climbs because of cold weather in the northeastern U.S.
March ultra low sulfur diesel rose 10.61 cents, or 5 percent, to close at $2.2179, the highest settlement since Nov. 28. March closed 32.56 cents above the April contract, the biggest gap for the two nearby contracts in at least 29 years.
“There’s a squeeze taking place,” Yawger said, “There’s a super spike in the spread between the two front months.”
Gasoline futures for March delivery rose 0.55 cent, or 0.3 percent, to settle at $1.6462 a gallon.
Regular gasoline at U.S. pumps is rising after slipping to the lowest level since April 2009 last month. The average retail price advanced 0.8 cent to $2.302 a gallon Sunday, according to AAA, the nation’s biggest motoring group.
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