Oil Plunges as U.S. Storage Swells, Demand Outlook Worsens
Oil Maintains Decline as U.S. Stockpiles Pose Unexpected Gain
(Bloomberg) -- Oil slumped to its lowest in almost five months as American crude stockpiles climbed and the U.S.-China trade war continued to put pressure on demand.
Futures dropped 4% in New York on Wednesday after government data showed U.S. crude stockpiles climbed to their highest since July 2017. Almost all of the increase was at the Cushing, Oklahoma, supply hub, further weighing on prices.
“It was disappointing to see another crude oil build, especially when there was at least a slight draw that was expected,” said Brian Kessens, portfolio manager and managing director at Tortoise in Leawood, Kansas. “The build can nearly all be attributed to Cushing. Possibly some of the Midcontinent refineries were still disrupted from the rainfall.”
Oil has slipped about 20% since late April as the entrenched trade war dents demand. The U.S. and China remain at loggerheads over trade and President Trump has said he’s personally holding up a trade deal with China unless it returns to terms negotiated early in the year.
West Texas Intermediate futures for July delivery closed down $2.13 to $51.14 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 14. Brent for August settlement closed at $59.97, down $2.32 or 3.7% on London’s ICE Futures Europe Exchange.
“There’s a good chance that we could threaten to break $50 in the next 48 hours,” said Phil Streible, senior market strategist at RJO Futures Group Inc. in Chicago.
The Organization of Petroleum Exporting Countries and its allies are very close to reaching an agreement to extend output cuts, according to the United Arab Emirates, even as the group struggles to set a date for its next meeting. The big issues for the alliance are rising inventories and the risk of slowing demand growth.
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--With assistance from Grant Smith and Heesu Lee.
To contact the reporter on this story: Rita Devlin Marier in New York at rdevlin5@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Carlos Caminada, Christine Buurma
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