U.S. Oil Prices decline to the lowest settlement since March 11, 2009

U.S. oil prices slid to a fresh six-year low Tuesday on expectations that domestic crude stockpiles have risen to a record high.

Light, sweet oil for April delivery settled down 42 cents, or 1 percent, at $43.46 a barrel on the New York Mercantile Exchange, the lowest settlement since March 11, 2009.

Stored supplies of crude oil in the U.S. are at the highest level in about 80 years, according to the U.S. Energy Information Administration, and production continues to grow. Demand is typically restrained at this time of year as refiners process less crude while performing seasonal maintenance.

The EIA is set to release inventory data for the week ended March 13 on Wednesday, and traders expect the report to show another build in crude stocks.

Concerns are mounting that oil inventories could reach maximum storage capacity in some locations, which could push down crude prices by limiting the places that producers could sell their crude.

“We take very seriously the concern that’s being expressed about crude-oil containment issues,” said Alan Levine, chief executive of energy brokerage Powerhouse. “We’re anticipating that prices will test down below $40.”

Prices pared some losses throughout the day. Analysts said this was because of traders closing positions ahead of the April options contract expiration Tuesday and taking profits after prices hit new lows Monday.

Though concerns remain that crude-oil storage will hit full capacity in some regions, “the threat of a capacity issue is not in the next day or two; it’s probably more in the next month or so,” said Gene McGillian, senior analyst at Tradition Energy.

After falling so far in the past few sessions, “we probably need another signal that the problems are still there and they’re getting worse to really continue to move lower.”

Analysts surveyed by The Wall Street Journal expect the EIA to report that crude supplies rose by 4.1 million barrels last week. They also expect gasoline supplies to fall by 900,000 barrels and stocks of distillates, including heating oil and diesel fuel, to fall by 500,000 barrels.

The American Petroleum Institute, an industry group, is scheduled to release its inventory data for the same period later Tuesday.

Traders are also waiting on the outcome of the Federal Open Market Committee meeting, which concludes Wednesday. If the Federal Reserve’s policy-making arm indicates that U.S. interest rates could rise around midyear, that would likely strengthen the dollar.

Oil is traded in dollars, so a stronger dollar makes oil less affordable to buyers using foreign currencies. Brent, the global benchmark, settled down 43 cents, or 0.8 percent, at $53.51 a barrel on ICE Futures Europe.

Gasoline futures rose 0.15 cent, or 0.1 percent, to $1.7301 a gallon. Diesel futures fell 0.47 cent, or 0.3 percent, to $1.6939 a gallon.

2015-03-20