Crude Oil Stays Below $30 a Barrel

Crude-oil prices stayed below $30 a barrel in early Asian trade Wednesday as anticipation of bigger U.S. crude stockpiles deepened the already-bearish outlook on oil.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March fell below the $30 mark overnight and traded at $29.68 a barrel at 0230 GMT, down $0.20 in the Globex electronic session. April Brent crude on London's ICE Futures exchange fell $0.10 to $32.62 a barrel.

According to estimates by industry group American Petroleum Institute, the U.S. crude stockpiles likely grew by 3.8 million barrels in the week ended Jan. 29 while a Wall Street Journal survey of analysts tips a 3.5 million-barrel increase. The official data will be released by the Energy Information Administration later today.

Oil prices rallied last week on speculations that Russia and the Organization of the Petroleum Exporting Countries could impose a collective supply cut to prevent prices from falling further. However, Saudi Arabia has yet to show signs of budging on its output, so the market is again being weighed by an expanding global glut of oil.

"This is a correction from the recent gains which were boosted by sheer speculations of more stimulus measures and a possible production cut," said an energy analyst based in Australia.

"This just goes to show you how fragile the market is right now, that any news, even though not fully confirmed, can stir up volatility," he added.

Oil prices have been on a downtrend since late 2014 when OPEC sought to defend its market share from their Russian and U.S. rivals. The move aimed to knock out high-cost competitors but prices have suffered in the process.

The "no-cut" tactic has proven to be a boon for consumers, especially drivers who are enjoying cheaper gasoline. But oil field operators across the globe are left struggling, with many incurring losses.

Exxon Mobil Corp., the world's largest publicly traded oil company, said fourth-quarter profit tumbled 58%, to the lowest level since 2002, as the worst oil crash in decades hampered drilling operations. Company's chief executive Rex Tillerson said the company would slash spending by 25% this year.

Similarly, the London-based BP PLC announced a $5.2 billion loss for last year and said the company plans to cut 7,000 jobs by 2017. Chevron Corp. of San Ramon, Calif. said last week it would cut spending by $9 billion and lay off 4,000 workers this year after reporting a loss of more than half a billion dollars for the previous quarter.

The massive plunge in spending by oil companies, however, is seen as a silver lining by many market observers, who said once the cuts trickle down to the production front in one or two years, global supply will shrink and prices will turn upward.

But with Iran ramping up its production and non-OPEC producers, such as Russia, still pumping at full speed, many say without a drastic cut in production near term, a price rebound remains in the far distance. Russia this week reported that its January crude production grew to 10.88 million barrels a day, up from 10.83 million barrels a day in December. Iran also pledged that it wouldn't entertain a production cut until its exports has risen by 1.5 million barrels a day.

"Yes, low prices will eventually cure low prices and the market will rebalance, but this would happen much sooner if OPEC production weren't still rising," said Tim Evans, an energy analyst at Citi Futures.

Bradley Olson and Chelsey Dulaney contributed to this article

Write to Jenny W. Hsu at [e-mail]

(END) Dow Jones Newswires

February 03, 2016 01:45 ET (06:45 GMT)

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