Oil trades near one-month low after U.S. crude stockpiles surge
Pubdate：2018-10-19 13:55
Source：GRANT SMITH
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LONDON (Bloomberg) -- Oil traded near the lowest level in a month after a bigger-than-expected gain in American stockpiles overshadowed tensions between the U.S. and Saudi Arabia over a missing critic of the kingdom.
Futures fell as much as 1.6% in New York to the lowest since Sept. 18. U.S. inventories rose 6.49 MMbbl last week, government data showed, more than twice the amount forecast in a Bloomberg survey. Even as the disappearance of Jamal Khashoggi kept the market on edge, President Donald Trump cautioned against putting the entire U.S.-Saudi relationship at risk.
Crude jumped earlier this month as uncertainty persisted over whether OPEC and its allies can offset supply losses from Iran after sanctions start in November. The gains were supported by U.S.-Saudi tensions after Trump pledged “severe punishment” should the kingdom be linked to Khashoggi’s disappearance. Still, expanding stockpiles and demand concerns have pegged prices back from a four-year high.
“Stocks are rising in the U.S., and the reason is because pipes out of the U.S. for exports are maxed out while U.S. production is rising,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.
West Texas Intermediate for November delivery dropped 98 cents to $68.77/bbl on the New York Mercantile Exchange at 9:03 a.m. local time, after falling $2.17 on Wednesday. Total volume traded Thursday was about 41% above the 100-day average.
Brent for December settlement was down $1.26 at $78.79/bbl on the London-based ICE Futures Europe exchange. The global benchmark was at a $10.11 premium to WTI for the same month, after settling at the highest level since June 11 on Wednesday.
Crude stockpiles in the U.S. have risen for four straight weeks, the longest run of gains since early 2017. Inventories in the storage hub of Cushing, Oklahoma, also increased by about 1.8 MMbbl last week to more than 28 MMbbl, the highest level in almost four months.
Saudi Oil
While Trump has repeatedly demanded that OPEC take action to lower oil prices, he considers Saudi Arabia an ally and reiterated on Wednesday that the kingdom agreed to buy $110 billion in U.S. weaponry last year. The Saudi response this week to Trump’s “punishment” pledge was read by traders as a warning that it could use oil as a political weapon.
“Despite the bullish talk, Saudi Arabia is very unlikely to pick the oil market as a means for retaliation,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich. “Constraining exports would be a blow to its carefully built credibility as a trustworthy supplier.”
Oil Market News
The Cboe/Nymex Oil Volatility Index increased 1.8% on Wednesday, the most in about a week. Production from America’s major shale plays is expected to rise by almost 100,000 bpd month-on-month in November to 7.71 MMbpd, according to an EIA report. Oil producers in the Permian basin have started selling a new stream of light crude, said people familiar with the matter, securing a market for the less dense oil being pumped from the largest U.S. shale play. Saudi Aramco will buy a stake in an upcoming Chinese mega refinery, its latest investment in the world’s biggest oil market as it pursues a strategy of securing avenues for oil sales.
