Oil Tumbles Most in Month as U.S. Supply Plunge Seen as One-Off

(Bloomberg) -- Oil dropped the most in more than a month after the biggest U.S. stockpile slump in 17 years was seen as a one-off caused by a tropical storm that disrupted imports and offshore production.

Futures slipped 3.7 percent in New York, paring the weekly advance to 3.2 percent. Crude inventories fell 14.5 million barrels last week, the biggest decline since January 1999, an Energy Information Administration report showed Thursday. Imports tumbled 21 percent as Tropical Storm Hermine moved into the Gulf of Mexico, disrupting shipping and output. Oil extended losses as equities slipped and the dollar rallied.

"We’re retracing yesterday’s move," said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. "We knew it was a one-off related to storms but could ignore it yesterday. Attention has shifted to the reality that we’re still left with a tremendous amount of oil at the end of the driving season."

Investors are parsing statements from members of the Organization of Petroleum Exporting Countries and Russia for signs of whether oil producers will agree on measures to bolster the market. While Saudi Arabia’s Energy Minister Khalid Al-Falih said Monday he’s optimistic producers will cooperate, a meeting with his Russian counterpart ended without any detailed plan.

West Texas Intermediate for October delivery fell $1.74 to settle at $45.88 a barrel on the New York Mercantile Exchange. It was the biggest decline since Aug. 1. The contract jumped 4.7 percent to $47.62 on Thursday, the most since April 8. Total volume traded was 21 percent above the 100-day average at 3:13 p.m.

Imports Tumble

Brent for November settlement slipped $1.98, or 4 percent, to $48.01 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 4.2 percent to $49.99 a barrel on Thursday. The global benchmark crude closed at a $1.55 premium to WTI for November delivery.

Oil’s decline accelerated as U.S. and European equities dropped and the dollar climbed. The Bloomberg Dollar Spot Index, which measures the currency against a basket of 10 peers, rose as much as 0.7 percent. A stronger greenback curbs the appeal of raw materials priced in the currency to investors.

"You can see clearly that as the dollar moved, oil moved with it," Adam Longson, commodity research analyst at Morgan Stanley in New York, said on Bloomberg Television.

Seasonal High

U.S. crude supplies declined to 511.4 million barrels in the week ended Sept. 2, according to EIA data. Inventories reached 543.4 million barrels in the week ended April 29, the highest since 1929. The stockpiles remain at their highest seasonal level since at least 1982.

Crude imports dropped to 7.07 million barrels a day last week, the biggest decline since September 2012, EIA said. Refineries increased operating rates by 0.9 percentage points to 93.7 percent of capacity, the highest since November 2015. Plants usually begin to cut back on operations in August as the peak-demand driving season comes to an end.

"This is an interesting follow up to yesterday’s big move higher," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "You aren’t going to see a 14-million-barrel build next week, but it’s safe to say a build in the 6 to 8 million range is likely."

Rigs targeting crude in the U.S. rose by 7 to 414 this week, extending the biggest return to activity since crude prices first began falling two years ago, Baker Hughes data show.

OPEC Talks

Al-Falih and Algerian Energy Minister Noureddine Bouterfa were scheduled to meet with OPEC Secretary General Mohammed Barkindo in Paris on Friday, Bouterfa said. A recovery in the oil markets is under way and there is consensus it won’t take too long, Barkindo said in Paris.

As major oil producers lay the groundwork for a potential deal to bolster crude prices, some analysts remain skeptical an agreement will be reached. Nigeria, Libya and Iran all hope to resume lost production after their output was severely constrained in recent years. They have the right to raise output, Bouterfa said in Moscow.

Oil-market news:

• Saudi Arabia told OPEC its oil production dropped by 40,000 barrels a day in August to 10.63 million barrels a day, according to a person with knowledge of the data.
• Crude exports by OPEC, excluding from Ecuador, Angola, Indonesia and Gabon, will increase by 480,000 barrels a day to 23.91 million barrels a day in the four weeks to Sept. 24, compared with the previous period to Aug. 27, Oil Movements said in a report.

--With assistance from Rakteem Katakey To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net, Susan Warren