By Timothy Puko and Georgi Kantchev
U.S. oil prices turned lower Thursday on concerns about massive
supplies.
Front-month West Texas Intermediate futures traded down 65
cents, or 1.5%, to $43.80 a barrel on the New York Mercantile
Exchange.
Brent crude for March delivery traded up 6 cents, or 0.1%, at
$48.53 a barrel on London's ICE Futures exchange.
The U.S. benchmark had posted small gains in early trade
Thursday, as investors who had bet on falling prices took profits
from Wednesday's drop to a nearly six-year low. U.S. prices slid
after government data showed crude stockpiles grew to their highest
level in at least 80 years.
The slide resumed around midmorning Thursday. Oil prices are off
close to 60% since a peak in June.
"When you lop off 60% in six months, further declines are going
to be really hard to come by," said Gene McGillian, an analyst at
Tradition Energy. "I don't think it's a bottom yet, but we're
approaching it."
Also Thursday, the U.S. government reported that unemployment
benefits in late January fell to their lowest level in 14 years,
potentially a good sign for demand, Mr. McGillian said. And there
is still some concern about the escalating conflict in Libya
curtailing oil supply there. But these small signs weren't
supportive of any serious turnaround, Mr. McGillian and others
said.
"What is really shocking is that U.S. production still continues
to increase despite low crude-oil prices," Phillip Futures analysts
said. "Without a drop in U.S. crude production, it is going to be
an uphill battle for oil bulls."
The surge in U.S. production has been driven by the booming
shale-oil industry taking advantage of technologies such as
horizontal drilling and hydraulic fracturing to unlock new oil and
gas reserves.
Norbert Rucker, head of commodity research at Julius Baer, said
that as drilling in the U.S. shale-oil industry has been "dropping
like a stone" since December and there is usually a four-month lag
between this affecting production growth, a flattening of U.S.
output should be expected soon.
This would drive a rebound in prices, but the "new normal" will
be lower than in recent years at about $65 a barrel, Mr. Rucker
said, citing advances in technology that have deflated production
costs.
"We also know now there is a lot more oil in the ground," he
said.
Write to Timothy Puko at tim.puko@wsj.com and Georgi Kantchev at
georgi.kantchev@wsj.com
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