Oil Falls Before Report Expected to Show U.S. Stockpile Gain

By Grant Smith

Jan. 22 (Bloomberg) -- Oil declined in New York before a report forecast to show that U.S. crude inventories increased last week.

U.S. crude stockpiles probably rose 1.4 million barrels in the week ended Jan. 16, according to the median of 14 analyst estimates in a Bloomberg News survey. It would be the 15th gain in 17 weeks. Stockpiles at Cushing, Oklahoma, where the West Texas Intermediate grade traded in New York is stored, have risen to their highest in at least four years.

“Some people are expecting a crude stock build this afternoon, even though narrower price spreads at the front of the curve may suggest otherwise,” said Harry Tchilinguirian. “WTI will remain weak as long as stockpiles at Cushing, the Nymex delivery point, stay at their elevated level.”

Crude oil for March delivery declined as much as 61 cents, or 1.4 percent, to $42.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $43.03 at 1:51 p.m. London time.

Saudi Arabia, the world’s top oil exporter, decided to cut production by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil told the state- run newspaper El Moudjahid. The Organization of Petroleum Exporting Countries controls 40 percent of the world’s oil.

“OPEC has been quite effective in cutting production and we should see a tighter market,” said Eliane Tanner, an analyst at Credit Suisse Group in Zurich. “We expect stabilization for the global economy, which could be as soon as the first quarter, and for prices to gradually increase.”

The U.S. Energy Department releases its weekly supply report at 11 a.m. today in Washington, a day later than usual because of the Martin Luther King Jr. holiday on Jan. 19.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net