The silhouette of an electric oil pump jack is seen near a flare at night in the oil fields surrounding Midland, Texas, U.S. (Photographer: Luke Sharrett/Bloomberg)

Crude Sinks as Swelling U.S. Inventories Outweigh OPEC's Plans

(Bloomberg) -- Oil fell to the lowest level since March after a U.S. government report showed the seventh straight weekly increase in domestic crude stockpiles and a jump in production.

Futures in New York dropped 0.9 percent Wednesday, extending the longest streak of losses since 2014. U.S. crude inventories gained 5.78 million barrels last week, according to the Energy Information Administration. Prices climbed earlier in the session on a report that OPEC and its allies are considering fresh production cuts.

“Basically, too much supply, too fast,” said Rob Thummel, managing director at Tortoise, which manages $16 billion in energy-related assets. “That’s overwhelmed the market and taken some of the momentum out of crude oil prices. OPEC’s probably going to have to re-assess and look at production cuts for 2019 at this point.”

Crude Sinks as Swelling U.S. Inventories Outweigh OPEC's Plans

The U.S. benchmark is on a downward spiral, nearing bear market territory, after trading above $76 a barrel in early October. Ministers from the Organization of Petroleum Exporting Countries will gather in Abu Dhabi this weekend to discuss options for 2019 including the possibility of cutting production again next year. Meanwhile, the U.S. government forecast that its own oil output will increase at a record pace this year. Futures have tumbled for eight straight days.

“This slide has been pretty persistent and unrelenting,” said Rob Haworth, who helps oversee about $151 billion at U.S. Bank Wealth Management in Seattle. “Technically, investors are wondering where this stops.”

West Texas Intermediate crude for December delivery fell 54 cents to settle at $61.67 a barrel on the New York Mercantile Exchange. Total volume traded was 57 percent above the 100-day average.

Brent futures for January settlement slipped 6 cents to end the session at $72.07 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $10.25 premium to WTI for the same month.

The EIA report showed domestic crude production jumped to a record 11.6 million barrels a day, while stockpiles at Cushing, Oklahoma, rose by 2.42 million barrels.

Other oil-market news:
  • Gasoline futures fell 2.8 percent to settle at $1.6474 a gallon, the lowest since December 2017. 
  • Saudi Arabia and Russia are being forced to reduce production after their plan on reversing cuts backfired, Iran’s representative to OPEC said, pegging the potential cut at more than 1 million barrels a day.
  • U.S. waivers for Iranian oil purchases are likely to be more extensive than the market expects, with the combined range seen at 1.2 million to 1.7 million barrels a day, FGE Chairman Fereidun Fesharaki said in a note.

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