Oil falls to 6-week low of $53.98

Oil prices collapsed last night to a six-week low of $53.98 a barrel after reports emerged that US crude stockpiles rose more than expected, according to a note by Goldman Sachs.

Oil production in the US also rose according to the report.

The fall has led some analysts to suggest that oil price could fall to as low as $40 a barrel if OPEC fails to extend its production cut deal which was reached at the end of last year and is credited for the recent stability in global oil markets.

Saudi Arabia and Russia, the architects of an oil production cut that has stabilized prices, presented a united front on compliance just as rising US inventories have sparked doubts about the OPEC and non-OPEC deal.

Khalid Al-Falih, the Saudi oil minister, acknowledged that global crude inventories aren’t draining as quickly as he expected, opening the door for an extension of the production cuts into the second half of the year.

The potential rollover is a subtle yet significant shift from just six weeks ago, when the minister said that an extension probably wouldn’t be needed.

Worries are rising that oil prices will tumble to $40 a barrel if OPEC doesn’t extend its pact later this year to cut output, according to one of the most prominent producers in the shale patch.

US shale drillers are keeping an eye on the second half of the year to see if OPEC and non-OPEC members extend their agreement, which lasts through June, to reduce production by 1.8m bbl/day, Scott Sheffield, chairman of Irving-based Pioneer Natural Resources Co., said Tuesday in an interview at an oil industry conference held in Houston.

One good news that came last night suggested that  China’s crude imports rose last month after the government granted import quotas allowing independent refiners to make overseas purchases. The world’s biggest energy user imported 8.32m bbl/day in February, according to Bloomberg calculations based on dataWednesday from the General Administration of Customs. On a daily basis, imports are up about 3.5% from the same month last year and advanced 3.4% from January’s 8.05m bbl/day, Bloomberg calculations show.