Oil halts rally as US crude stockpiles seen exacerbating glut

Melbourne: Oil halted its advance above $57 a barrel before US government data forecast to show crude stockpiles expanded further from a record.
June futures were little changed in New York after gaining 1% on Monday. Crude inventories probably increased by 2.5 million barrels last week, a Bloomberg survey showed before an Energy Information Administration (EIA) report on Wednesday. The return of embargoed Iranian oil to world markets looks no closer, according to UBS Group AG.
Oil has rallied 30% from a six-year low in March on signs the idling of US drilling rigs is spurring a production slowdown that may ease a global supply glut. The price rise may still falter with the country’s stockpiles having swelled to the highest level in 85 years.
“The market has gone into a wait-and-see mode,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said by phone. “That sets the market up for a bit of volatility when we get the next set of EIA numbers. People want confirmation that the rig-count drop is going to deliver production cuts.”
West Texas Intermediate (WTI) for June delivery was at $57.81 a barrel in electronic trading on the New York Mercantile Exchange, down 7 cents, at 1:28 pm Sydney time. The May contract, which expires Tuesday, was 1 cent lower at $56.37. Total volume was about 80% below the 100-day average. Prices are up 5.8% this year.
Crude stockpiles
Brent for June settlement was slid 2 cents to $63.43 a barrel on the London-based ICE Futures Europe exchange. It closed unchanged at $63.45 on Monday. The European benchmark crude traded at a premium of $5.64 to WTI for the same month.
Crude stockpiles in the US, the world’s biggest oil consumer, climbed to 483.7 million barrels through 10 April, the highest level in weekly EIA data that started in August 1982. Monthly records compiled by the Energy Department’s statistical arm dating back to 1920 show supplies haven’t been this high since 1930.
Production fell by 20,000 barrels a day to 9.38 million a day, the slowest pace in five weeks, the EIA said. Drillers have reduced the number of active machines to 734, the fewest since November 2010, according to data from Baker Hughes Inc., an oilfield-services company. The rig count has declined by more than half since December.
Iran deal
Nuclear inspectors will need unfettered access in Iran as part of a deal to lift economic sanctions, US Energy Secretary Ernest Moniz said Monday, a day after an Iranian general declared that military sites must be off limits.
The US and five other world powers 2 April announced a framework for an agreement to curb Iran’s nuclear programme in exchange for relief from economic sanctions. Even if a final accord is reached by the 30 June deadline, oil exports from the Persian Gulf nation are unlikely to recover before next year, UBS predicted.
In Houston, Halliburton Co. beat analysts’ earnings estimates and accelerated the pace of job cuts ahead of a planned $34.6 billion takeover of Baker Hughes. The provider of oilfield services has fired a total of 9,000 workers during the past two quarters, or more than 10% of its global workforce, according to Christian Garcia, the interim chief financial officer. Bloomberg
Source: Mint; 21 April 2015

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