Oil Closes Below $70 for Fourth Session as Stockpiles Accumulate

(Bloomberg) -- Crude settled below $70 a barrel for a fourth straight session as Saudi Arabia backed away from using its oil wealth as a diplomatic hammer and American inventories expanded at the fastest pace in more than a year and a half.

Futures added a nickel in New York on Monday. Saudi Arabian Energy Minister Khalid Al-Falih eased concern that the world’s biggest oil exporter would withhold supplies to counter any punishment over the killing of regime critic Jamal Khashoggi.

Any disruption to output from the Saudis or other major producers would be buffered by U.S. producers who have been pumping more than 10.5 million barrels a day since April. American crude stockpiles probably rose by 3 million barrels last week for the longest streak of weekly increases since March 2017, according to a Bloomberg survey.

“The market appears to be in somewhat of a cautionary holding pattern,” said Thomas Finlon, director of Energy Analytics Group LLC.

Earlier this month, crude fell from a four-year high as a darkening demand outlook and equity market routs spurred a flight from risky assets. While U.S. President Donald Trump praised Saudi Arabia’s official report on Khashoggi’s demise, the oil market remains on edge as many leaders questioned the explanation that he was accidentally killed in an altercation. Turkish officials have leaked details saying the journalist was murdered.

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“The Saudis admitting that Khashoggi died in the consulate may make some nervous about how the West reacts, but Al-Falih saying that they will continue to increase output and won’t use oil as a weapon isn’t as constructive” for oil prices, said Warren Patterson, commodities strategist at ING Bank NV.

West Texas Intermediate for November delivery, which expires Monday, settled at $69.17 a barrel on the New York Mercantile Exchange. The more active December contract also was little changed, closing at $69.36.

Brent for December settlement gained 5 cents to close at $79.83 on the London-based ICE Futures Europe. The global benchmark traded at a premium of $10.47 to West Texas Intermediate for the same month.

Al-Falih told TASS that Saudi Arabia has no intention of repeating the 1970s oil embargo, in which it and several regional allies squeezed supplies to the U.S. and Europe in retaliation of their support for Israel. The kingdom will raise output to 11 million barrels a day in the near future and has the ability to reach 12 million if the market requires it, he said.

Meanwhile, American explorers expanded drilling activity for a second week despite a dramatic pullback in the frack work needed to put the finishing touches on new wells. More than 125 additional rigs have been deployed across U.S. fields this year.

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