The biggest U.S. petroleum stockpiles in two decades are leading oil bears to predict further price declines that may lead OPEC to restrict production.

Inventories of crude and fuel products rose to 1.13 billion barrels last week, the highest level since the Energy Department began keeping combined weekly data in January 1990, according to a report Aug. 18. Oil has fallen 11 percent since reaching a three-month high on Aug. 3.
The U.S. economy is showing increasing signs of slowing growth, and demand for fuel products has declined 6 percent to 19.7 million barrels a day since the recession began in December 2007, according to the Energy Department. With predictions that oil will fall below $70 a barrel, there is growing pressure on the Organization of Petroleum Exporting Countries, the 12-nation group that pumps 40 percent of the world’s crude, to stick to their production quotas.
“Stocks are high and that is bearish,” said Mike Wittner, who heads oil research at Societe Generale SA. “If prices go significantly below $70 with some momentum and stay there, then they take action. Somewhere in the $60 to $70 range is where they would start cutting real production.”
Crude hasn’t traded below $70 since June 7, when it fell as low as $69.51 a barrel. Oil for September delivery fell 97 cents, or 1.3 percent, to settle at $73.46 on the New York Mercantile Exchange. Crude has fallen 2.6 percent this week to a six-week low.
Oil may fall below $70 a barrel in coming months, according to Michael Lynch, president of Strategic and Economic Research in Winchester, Massachusetts. The declines may prompt OPEC to clamp down on members exceeding their quotas, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.
(Source: Bloomberg)