West Texas Intermediate crude prices sank to a six year intraday low on speculation that continuous ample supply would soon start to strain the country’s storage capacity.
According to data from the Energy Information Administration, US oil stockpiles have built up to the highest level since 1982.
Inventories at Cushing, Oklahoma- the country’s major delivery and storage site for New York futures-have reportedly reached 70%.
Prices for the country’s crude benchmark were poised to reach a six year intraday low with investors focusing on the oil glut.
The Price drop was despite heartening news from OPEC that forecast a reduction in the country’s output by the end of the year.
Instead, the market was pulled down by the possibility of Iran adding onto the already bulging stockpiles.
The Wall Street Journal reports that the US and Tehran could sign a potential political agreement pertaining to the country’s nuclear program before the end of the month. This will pave way for Iran to export oil.
On the New York Mercantile Exchange, Crude oil for April delivery tumbled $1.76 or 3.9% to trade at 43.08 a barrel after earlier touching a low of $43.03. Prices for oil futures- the most active US contract-have not settled this low since March 2009.
Brent for April delivery on the London-based ICE Futures Exchange slipped $1.91 or 3.5% to $52.76 a barrel on Monday to add onto last week’s 9.6% drop.
French Bank Societe Generale estimated that global inventories were growing at a rate of 1.6 billion barrels per day (BPD). It forecast that the world oil stockpiles would accelerate to grow at about 1.7 million barrels per day in the second quarter.
“Weakness hit the oil markets last week, and we expect it to continue,” Societe Generale oil analyst Michael Wittner told Reuters.
“The arithmetic works out to a combined build in crude oil and refined products of approximately 200 million barrels in March-June. Any way you slice it, this is bearish for prices.”
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