Crude slid to the lowest level in more than six years in New York as a rising number of oil rigs in the U.S. signaled the supply glut will be prolonged.
Futures dropped as much as 1.9 percent after Baker Hughes Inc. reported that the number of active oil rigs in the U.S. climbed by 17 this week to 541. U.S. crude stockpiles surged to 490.7 million barrels, the highest for this time of year since 1930, according to the Energy Information Administration. Goldman Sachs Group Inc. warned of “high risks” that prices may sink further as supplies swell.
Oil is trading at levels last seen during the global financial crisis on signs the surplus will be exacerbated. The Organization of Petroleum Exporting Countries abandoned output limits at a Dec. 4 meeting while the U.S. Federal Reserve increased interest rates this week, boosting the dollar and reducing the appeal of commodities traded in the U.S. currency. Both houses of Congress approved on Friday a $1.1 trillion spending measure that averts a U.S. government shutdown and would end a 40-year-old ban on most crude exports.
“We’re starting to realize that the bottom could be very low,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “There’s such a surplus that it’s hard to see anything bringing the market into balance in the next six to nine months, even under the most favorable conditions.”
West Texas Intermediate for January delivery fell 50 cents, or 1.4 percent, to $34.45 a barrel at 1:17 p.m. on the New York Mercantile Exchange. The contract dropped to $34.29 earlier, the lowest since February 2009.
Brent crude for February settlement dropped 35 cents, or 0.9 percent, to $36.71 a barrel on the London-based ICE Futures Europe exchange. The European benchmark oil traded at a 77-cent premium to the February WTI contract.-Bloomberg