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Oil drops over 2% Thursday, pushing the U.S. benchmark to its lowest finish since April

By Mayra P. Saefong

Petroleumworld 11 01 2018

Oil futures dropped Thursday, sending the U.S. benchmark to its lowest finish since April and pushing the global benchmark below its 200-day average for the first time in more than a year, as reports showed sizable increases in last month's global production.

December West Texas Intermediate crude CLZ8, -0.16%  on the New York Mercantile Exchange fell $1.62, or 2.5%, to settle at $63.69 a barrel. Prices for the front-month U.S. benchmark, which posted a loss of 10.8% for October, marked the lowest settlement since April 9, according to data compiled by Dow Jones Market Data.

The global benchmark, Brent crude for January delivery fell $2.15, or 2.9%, to finish at $72.89 a barrel on the ICE Futures Europe exchange, the lowest since Aug. 21. It dropped below the 200-day moving average for the first time since September 2017, according to FactSet.

Brent fell 8.8% in October. The declines were the biggest monthly percentage falls for both grades since July 2016.

“Folks are getting around to reading the monthly petroleum data” that was released recently, said James Williams, energy economist at WTRG Economics. “This takes some of the edge off the Iranian sanctions.”

Separate surveys by Bloomberg and Reuters revealed that members of the Organization of the Petroleum Exporting Countries lifted output in October to their highest level since late 2016.

OPEC lifted its production to 33.31 million barrels a day in October, up 390,000 barrels a day from September, according to a recent Reuters survey . Bloomberg's survey said the group's output rose by 430,000 barrels a day to 33.33 million barrels a day last month.

And a report from the Energy Information Administration showed that U.S. monthly crude-oil production reached 11.3 million barrel a day in August, up from 10.9 million barrels a day in July. The August level marked the first time monthly U.S. output topped 11 million barrels a day, “making the United States the leading crude oil producer in the world,” the EIA said.

Rising output has offset worries surrounding renewed U.S. sanctions on Iran, which take full effect next week.

“Rising petro-nations' oil production, the U.S. shale oil boom, swelling North American oil inventories and, not least, too high oil prices curbing emerging market oil demand growth were the factors which calmed the bullish market mood” in October, pulling the price of Brent from above $85 a barrel to below $75,” said Norbert Ruecker, head of macro and commodity research at Julius Baer, in a note.

A U.S.-led global equity rout also served to dent sentiment in the oil market, analysts said. Stock benchmark S&P 500 SPX, +1.06%  saw its biggest monthly decline in seven years last month . Stocks were higher Thursday, however, with the S&P 500 aiming for its first three-day win streak in six weeks as oil futures settled.

All that said, the Iran embargo will leave the global market with only a small buffer to absorb any shocks, likely skewing price risks to the upside in the near term, Ruecker said, while the impact of the embargo will likely depend on the degree of compliance by China and India, the two largest buyers of Iranian crude.

Oil was also under pressure Wednesday after the EIA said U.S. crude supplies rose 3.2 million barrels in the week ended Oct. 26, the sixth straight weekly increase.

“The ability of crude stocks to continue climbing higher even as Iranian exports drop ahead of U.S. sanctions suggests the market has retained some adaptability in terms of overall supply,” said Robbie Fraser, commodity analyst at Schneider Electric.

In other energy trade, December gasoline RBZ8, +0.04%  fell 2% to about $1.717 a gallon, while December heating oil HOZ8, -0.17%  lost nearly 2.3% to $2.201 a gallon.

Natural-gas futures, meanwhile, edged down from Wednesday's settlement level after the EIA reported Thursday that domestic supplies of natural gas rose by 48 billion cubic feet for the week ended Oct. 26. Consensus expectations had called for a build in the 50 billion to 55 billion cubic foot range, according to Schneider Electric.

December natural gas NGZ18, +0.15%  fell 0.7% at $3.237 per million British thermal units.



Story by Mayra P. Saefong from MarketWatch.

11 01 2018 19:38 GMT

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