Oil Falls After U.S. Stockpiles Swell for Fourth Straight Week
(Bloomberg) -- Oil posted the biggest decline in two months after U.S. government data showed expanding crude stockpiles.
Futures fell 3 percent in New York on Wednesday. Domestic crude inventories rose by more than twice the rate forecast by analysts last week, according to the Energy Information Administration. Stored supplies have been growing for four weeks, the longest streak of gains since early 2017. Stockpiles also swelled at the nation’s key storage hub in Oklahoma to the highest since June.
“That’s a negative for oil prices right now, the larger-than-expected build in inventories this week,” said Rob Thummel, managing director at Tortoise, which manages $16 billion in energy-related assets.
Crude has risen for two out of three sessions this week after Saudi Arabia hinted it may use its oil wealth as a weapon against any punitive measures tied to the disappearance of a prominent regime critic. The simmering diplomatic dispute occurred against the backdrop of U.S. sanctions on Iran that have hobbled exports by the Islamic Republic.
“The inventory numbers were a real bearish surprise,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “That combined with the gradual lessening of tension,” regarding journalist Jamal Khashoggi, “has taken some of the steam out of the market.”
West Texas Intermediate for November delivery tumbled $2.17 to settle at $69.75 a barrel on the New York Mercantile Exchange, the lowest level in a month. Total volume traded was about 34 percent above the 100-day average.
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Brent for December settlement slid $1.36 to end the session at $80.05 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $10.35 premium to WTI for the same month, the widest since June.
The EIA report on Wednesday showed that crude stockpiles rose 6.49 million barrels last week, while inventories at the Cushing, Oklahoma, complex climbed by 1.78 million barrels. Front-month WTI futures closed at a 5-cent premium to its second-month contract, the smallest backwardation since June.
Oil exports dropped last week and crude production fell to 10.9 million barrels a day, showing the impact of limited production in the U.S. Gulf of Mexico due to Hurricane Michael.
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