Oil extends drop as unexpected stockpile gain expands U.S. glut

NEW YORK (Bloomberg) -- Oil extended its decline for a second day as U.S. crude stockpiles unexpectedly increased, keeping supplies at the most in more than eight decades.

 

Futures slid as much as 0.8% in New York after falling from the highest level in seven months on Wednesday amid a surging U.S. currency. Inventories increased by 1.3 MMbbl last week, according to government data. Rain in Canada may slow fires that have shifted back toward oil-sands operations. The Bloomberg Dollar Spot Index rose after the Federal Reserve published minutes of its latest monetary policy suggesting a June hike is possible.

 

Crude has surged more than 80% since slumping to the lowest in 12 years earlier this year on signs the global glut will ease as U.S. output declines. OPEC’s strategy to defend market share is working, Kuwait’s acting oil minister said in an interview Wednesday and the market moved into a deficit earlier than expected, according to Goldman Sachs Group Inc.

 

“While the demand-supply outlook has improved, oil has had a very substantial rise and we are getting toward the stage where high inventories and producer hedging are probably likely to cap the rally,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “The sharply higher U.S. dollar has seen momentum steady.”

 

West Texas Intermediate for June delivery, which expires Friday, fell as much as 36 cents to $47.83/bbl on the New York Mercantile Exchange and was at $47.92 at 8:25 a.m. Hong Kong time. Total volume traded was about 49% below the 100-day average. The more-active July contract slid as much as 38 cents to $48.40.

 

Brent for July settlement lost as much as 39 cents, or 0.8%, to $48.54/bbl on the London-based ICE Futures Europe exchange. The contract fell 35 cents to close at $48.93 on Wednesday. The global benchmark crude traded at a premium of 8 cents to WTI for July.