Oil Near 7-Week Low on Signs U.S. Stockpiles Rose a Third Week

Oil traded near its lowest closing level in seven weeks in New York as signs of rising U.S. crude stockpiles fanned concern of a new surge in shale-oil production.

U.S. crude futures dropped 0.7 percent after settling on Tuesday at the lowest since Dec. 22. The American Petroleum Institute was said to have reported nationwide crude stockpiles rose by 3.95 million barrels last week, which would be a third straight increase if confirmed by government data on Wednesday.

Oil has erased this year’s gains after the best start in more than a decade, putting in jeopardy the Organization of Petroleum Exporting Countries and its allies’ plan of cutting supply to drain a global glut and boost prices. The International Energy Agency  warned that while crude inventories in developed nations are falling and demand is rising, OPEC’s curbs may be backfiring by stimulating more U.S. shale-oil output.

“The U.S. is clearly expanding supply a lot more than the market was expecting,” Hootan Yazhari, managing director for frontier markets at Bank of America Merrill Lynch in Dubai, said in a Bloomberg television interview.

Inventory Concerns

West Texas Intermediate for March delivery slipped 40 cents to $58.79 a barrel on the New York Mercantile Exchange as of 10:16 a.m. in London, an eighth decline in the past nine sessions. Total volume traded was about 7 percent below the 100-day average.

Brent for April settlement dropped 28 cents to $62.44 on the London-based ICE Futures Europe exchange and traded at a $3.83 premium to WTI for the same month.

The API was said to have reported that gasoline supplies expanded by 4.63 million barrels last week along with higher crude stockpiles. A separate Bloomberg survey showed crude inventories probably increased by 3.1 million barrels.

“Crude oil prices will face severe pressure in the near term as rising U.S. rig count and inventories are expected to hamper OPEC’s collective efforts,” Avtar Sandu, a senior commodities manager at brokerage Phillip Futures Pte said in an emailed note.

Other oil-market news:

Saudi Arabia, Russia and OPEC are trying to stabilize the oil market, according to Saudi Oil Minister Khalid Al-Falih. The kingdom will keep exports below 7 million barrels a day in March, Saudi Arabia’s Energy Ministry said. Occidental Petroleum Corp., the top oil producer in the Permian Basin, is boosting spending to expand further into America’s most prolific field as majors like Exxon Mobil Corp. and Chevron Corp. threaten its dominance. U.S. tight oil production is set to grow by 2 million barrels a day by 2019, according to Wood Mackenzie Ltd.