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Record US Crude Stocks Send Oil Futures to Three-Week Low

March 2, 2017 at 18:06 by Andrew Moran

Oil prices are tumbling on Thursday on surging production and growing supply levels. Oil futures are flirting with their lowest levels since the beginning of February because of record US crude stockpiles and Russian oil production remaining unchanged last month.

April West Texas Intermediate (WTI) crude futures fell $1.10, or 2.04% to $52.73 per barrel at 16:41 GMT on Thursday on the New York Mercantile Exchange. US crude is poised to settle at its lowest level since February 8. It is also deepening its losses in 2017 at it has declined more than 5% year-to-date.

Brent, the international benchmark for oil prices, is also being impacted. May Brent crude futures slipped $1.15, or 2.04%, to $55.21 a barrel on London’s ICE Futures exchange. Brent is down close to 5% year-to-date.

The US Energy Information Administration (EIA) reported on Wednesday that crude inventories climbed by 1.5 million barrels last week to an all-time record of 520.2 million barrels. The immense buildup of stocks was due to massive imports from Canada, Iraq, and Saudi Arabia and from rising domestic production.

Russia appears to be signaling that it will not go all the way to curb its oil output. Data from the Ministry of Energy in Moscow showed that production was unchanged in February at 11.11 million barrels per day (bpd). Despite agreeing to a global deal with Organization of Petroleum Exporting Countries (OPEC), Moscow may be pausing its efforts to slash output.

OPEC members, meanwhile, are at 94% compliance as they cut their output for the second straight month in February. As part of efforts to keep oil prices above $50 – Saudi Arabia is targeting $60 sometime this year — the oil cartel is looking to limit oil output to 1.8 million bpd. The biggest roadblock is the ramped up production coming from US companies, which is offsetting the OPEC cuts.

Analysts expect oil prices to stay within the $50 to $55 range until the next major OPEC meeting in May in Vienna. It remains unclear if OPEC will agree to extend the production freeze.

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