Oil futures saw their third lowest settlement of the year on Thursday as traders fretted over record U.S. supplies and failed to see any real indications that crude output is headed for a significant decline.
Crude for delivery in April settled at $43.96 a barrel, down 70 cents, or 1.6%, on the New York Mercantile Exchange, giving up much of the 2.8% gain it scored a day earlier. The April contract expires at the close on Friday. The May contract which settled at $45.53 on Thursday, will become the front month. Prices for both contracts have posted declines in seven of the last eight sessions. The May Brent crude on London’s ICE Futures exchange fell $1.48, or 2.7%, to $54.43 a barrel. The Federal Open Market Committee’s monetary policy announced Wednesday “was a continuation of prevailing policies, with no change at all,” said Richard Hastings, macro strategist at Global Hunter Securities. The Fed took a cautious approach to raising interest rates.
Nymex crude settled with a gain of 2.8% on Wednesday, snapping a six-session losing streak, as the U.S. dollar took a hit in the wake of the Fed’s policy statement. The greenback recouped some lost ground Thursday, likely adding pressure to dollar-denominated prices for oil.
But the glut of oil supplies in the U.S. continues to weigh on prices. Overall, oil stockpiles rose more than expected, by 9.6 million barrels to 458.5 million barrels last week, the U.S. Energy Information Administration said Wednesday. At the oil-storage hub of Cushing, Okla., they rose by 2.9 million barrels, edging closer to full capacity.
“Crude oil is reflecting implied weakness over the upcoming few months in the context of no change in global sentiment regarding output,” Hastings said. “As long as prices are this low, then production will remain pretty aggressive.” Ali al-Omair, the Kuwaiti oil minister, said the Organization of the Petroleum Exporting Countries had no choice but to maintain production levels “because we don’t want to lose our share in the market,” according to news reports.
Still, analysts at French bank Société Générale said the rate of increasing oil stocks at Cushing, and for the U.S. overall, should start to ease in April or May.