Oil down after record U.S. crude stocks; Brent below $55

Wed Feb 11, 2015 4:15pm EST
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices fell as much as 3 percent on Wednesday after U.S. stockpiles hit record highs, and analysts and traders said the market could shed more of a two-week rebound that was spurred by expectations of lower output.

U.S. crude stocks rose by almost 5 million barrels last week to reach nearly 418 million barrels, the highest since 1982, when records started being kept, government data showed. Analysts polled by Reuters had forecast a build of nearly 4 million barrels. [EIA/S]

The record inventory was a sign the market was still struggling to find a home for some 2 million barrels per day of oil. The glut has prevented prices from forming a bottom to a sell-off that began last summer, analysts said.

"It proves that the price retracement we had on the capital expenditure cuts and falling rig counts may have been premature," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

Energy firms slashed billions of dollars from their oil exploration budgets, and the number of U.S. oil drilling rigs fell to three-year lows after crude prices fell by about 60 percent from their June peaks.

On Wednesday, benchmark Brent oil LCOc1 dropped below the $55-per-barrel support level, settling down $1.77, or 3 percent, at $54.66 a barrel. U.S. crude CLc1 closed down $1.18, or about 2 percent, at $48.84 a barrel.

Fawad Razaqzada, technical analyst in London for FOREX.com, said Brent could fall to $53 a barrel and U.S. crude could go below $47.50 a barrel.

After the rout over the past seven months on worries of a global supply glut, oil prices have risen in five of the last nine sessions, due mostly to what traders say is short-covering.   Continued...

A gas station attendant fills a customer's vehicle in Turnersville, New Jersey December 4, 2014. REUTERS/Tom Mihalek