Oil Falls Most in Eight Weeks as Investors Avoid Risky Assets

Futures dropped as much as 1.8 percent in New York, after sliding 2.4 percent Wednesday.

Jessica Summers

12 Oct 2018, 11:37 AM IST

Oil Falls Most in Eight Weeks as Investors Avoid Risky Assets

An oil pipeline control head sits on display outside the entrance to the Abu Dhabi National Oil Company (ADNOC) headquarters in Abu Dhabi, United Arab Emirates. (Photographer: Christopher Pike/Bloomberg)

(Bloomberg) -- Crude posted the biggest decline in eight weeks as a risk-off sentiment spread through global markets.

Futures tumbled 3 percent in New York on Thursday. Investors eyed a sixth day of U.S. equity losses along with heightened volatility. Meanwhile, domestic crude stockpiles rose for a third straight week as refineries conducted seasonal maintenance, processing less oil, according to data from the Energy Information Administration.

“The enhanced volatility in the market in general is spilling over into energy, as investors are reducing risk,” said Rob Thummel, managing director at Tortoise, which manages $16 billion in energy-related assets. “When you have volatile equity markets, the risk-off trade is happening and you’ve got a third consecutive build, that’s generally not a good recipe for crude oil prices.”

OPEC cut its estimate for global demand for its crude next year due to weakening economic growth and higher output from rivals, such as U.S. shale drillers. OPEC’s outlook comes amid pressure on the cartel to pump more to offset any impact from Iranian sanctions and calls from U.S. President Donald Trump to boost output.

West Texas Intermediate for November delivery slid $2.20 to settle at $70.97 a barrel on the New York Mercantile Exchange, the lowest level in more than two weeks. Total volume traded was about 21 percent above the 100-day average.

A measure of oil market volatility climbed to the highest level since July earlier in the session.

Brent for December settlement fell $2.83 to end the session at $80.26 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.45 premium to WTI for the same month.

Investors seeking to pinpoint the cause of the current rout in equities have no shortage of culprits: U.S companies are increasingly fretting the impact of the burgeoning trade war, while the same issue prompted the International Monetary Fund to dial down global growth expectations.

In the U.S., the EIA reported domestic commercial crude inventories rose 5.99 million barrels last week, while refinery utilization dropped to the lowest level since March. Stockpiles in the Strategic Petroleum Reserve fell by 1.31 million barrels. Analysts surveyed by Bloomberg had forecast a 2.8 million barrel rise in crude supplies.

Other oil-market news
Gasoline futures declined 4.3 percent to settle at $1.9327 a gallon, the lowest level since March. The strongest hurricane to strike the U.S. mainland in decades, Hurricane Michael, has left about 900,000 people in the dark across five states as it weakens over South Carolina on a path up the Atlantic coastline. Natural gas has begun flowing again on a smaller pipeline in British Columbia, after a rupture on an adjacent line forced oil refineries in Washington to cut output and pushed gasoline prices higher in the Pacific Northwest. Analysts and traders are bearish on WTI crude futures, according to a Bloomberg survey.

Other oil-market news

Gasoline futures declined 4.3 percent to settle at $1.9327 a gallon, the lowest level since March. The strongest hurricane to strike the U.S. mainland in decades, Hurricane Michael, has left about 900,000 people in the dark across five states as it weakens over South Carolina on a path up the Atlantic coastline.
Natural gas has begun flowing again on a smaller pipeline in British Columbia, after a rupture on an adjacent line forced oil refineries in Washington to cut output and pushed gasoline prices higher in the Pacific Northwest.
Analysts and traders are bearish on WTI crude futures, according to a Bloomberg survey.

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Mike Jeffers, Joe Carroll