Supplies at Cushing, where oil that’s traded in New York is stored, rose 21 percent to 27.5 million barrels last week, the highest since May 2007, the Energy Department said on Dec. 17. OPEC’s biggest output cut in more than a decade this week failed to stop a price drop as the recession sapped demand.
Crude oil for January delivery fell $3.05, or 8.4 percent, to $33.17 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $32.40, the lowest since February 2004. The January contract expires today. The more-active February contract rose 69 cents, or 1.7 percent, to $42.36.
It’s the biggest premium between the two most-active contract months in Bloomberg data going back to 1986. The spread allows oil traders who can line up credit and storage space to lock in profits by buying and holding crude oil to sell a month from now.
This price structure, in which the subsequent month’s price is higher than the one before it, is known as contango. A market in contango encourages companies to increase stockpiles. U.S. crude-oil supplies rose in 11 of the past 12 weeks, according to the Energy Department.
Crude inventories in Cushing may increase to full capacity within a matter of two or three weeks,” Barclays Capital analysts led by Paul Horsnell said in a research note Dec. 17.
The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil, agreed on Dec. 17 to cut output by 2.46 million barrels a day starting Jan. 1 in an effort to bolster prices, which have slumped 37 percent this month.
OPEC may meet again in Kuwait on Jan. 19 to discuss further production cuts, Chakib Khelil, the president of the group, said today. OPEC will continue reducing output as demand falls, Khelil said in an interview in London.
World oil consumption next year will drop by 0.2 percent to 85.68 million barrels a day, OPEC said in a Dec. 15 report. The U.S. Energy Department said on Dec. 9 that global demand will decline 0.5 percent to 85.3 million barrels a day.
Brent crude oil for February settlement rose 79 cents, or 1.8 percent, to $44.15 a barrel on London’s ICE Futures Europe exchange.