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U.S. oil ends below $70 a barrel Wednesday as inventories continue to rise

By Mayra P. Saefong

Petroleumworld 10 17 2018

Oil futures dropped Wednesday, with the U.S. benchmark ending below $70 a barrel for the first time in more than three weeks, as U.S. government data revealed a sizable climb in domestic crude supplies for a fourth week in a row.

November West Texas Intermediate crude on the New York Mercantile Exchange CLX8, +0.27%  fell $2.17, or 3%, to settle at $69.75 a barrel. That was the lowest finish for a front-month contract since Sept. 17, according to FactSet data. December Brent crude LCOZ8, +0.25% the global benchmark, declined $1.36, or 1.7%, to $80.05 a barrel on ICE Futures Europe after an intraday low of $79.17. The settlement was the lowest since Sept. 21.

The Energy Information Administration reported Wednesday that domestic crude supplies rose by 6.5 million barrels for the week ended Oct. 12. That followed three consecutive weeks of gains. Analysts surveyed by S&P Global Platts had forecast a rise of 1.88 million barrels, while the American Petroleum Institute on Tuesday reported a decline of 2.1 million barrels in crude inventories.

The EIA numbers “were an eye opener with a large build in crude oil and in Cushing, Okla.,” the delivery hub for Nymex crude futures, said Tariq Zahir, managing member at Tyche Capital Advisors.

“From the global macro standpoint, with the equity markets giving back a large portion of their gains from Tuesday, we look like we are in a risk-off posture,” he said. So with the latest EIA numbers, “we feel the risk is to the downside, especially with the equity markets selling off.”

Gasoline stockpiles fell by 2 million barrels last week, while distillate stockpiles declined by 800,000 barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply declines of 1.52 million barrels in gasoline and 1.5 million barrels for distillates.

“A tick higher in refining activity and a drop in production due to hurricane activity in the Gulf was not enough to halt” the trend of weekly climbs in crude supplies, said Matt Smith, director of commodity research at ClipperData.

On Nymex, November gasoline RBX8, +0.18%  fell 3% to $1.919 a gallon, while November heating oil HOX8, +0.19%  shed 1.2% to $2.311 a gallon.

Bucking the trend among its energy peers, November natural gas NGX18, -0.15%  added 2.5% to $3.32 per million British thermal units.

Analysts said oil had found earlier support after Mohammed Barkindo, the secretary-general of the Organization of the Petroleum Exporting Countries, said Saudi Arabia had assured the cartel it would work to ensure there would be no shortage in the oil market. Barkindo's remarks came after he was asked at a conference in New Delhi about the potential impact of the controversy surrounding the disappearance and alleged murder of Saudi journalist Jamal Khashoggi, Reuters reported .

News reports said Barkindo had described the oil market as well-supplied but fragile.

Also, President Donald Trump criticized the global condemnation of Saudi Arabia over the Khashoggi disappearance, comparing it with the controversy surrounding Supreme Court Justice Brett Kavanaugh's Senate confirmation.

Some U.S. lawmakers have called for sanctions against Saudi Arabia if its rulers are found complicit.


Story by Mayra P. Saefong from MarketWatch.
10 17 2018 19:07 GMT

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