Oil extends losses as other markets fall, stockpiles climb

Crude inventories climbed by 9.7 million barrels in the week to October 5 to 410.7 million. (Reuters)
Updated 11 October 2018
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Oil extends losses as other markets fall, stockpiles climb

  • US crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew
  • Crude inventories climbed by 9.7 million barrels in the week to October 5 to 410.7 million

TOKYO: Oil fell to two-week lows on Thursday as it extended big losses from the previous session amid a rout in global stock markets, with prices also hit by an industry report showing US crude inventories rose more than expected.
Supply worries also eased as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida, even as it caused at least one death, injuries and widespread destruction.
Brent crude futures were down $1.32, or 1.6 percent, at $81.77 a barrel by 0543 GMT. They earlier touched their lowest since Sept. 27 at $81.35, after closing 2.2 percent lower on Wednesday.
US West Texas Intermediate (WTI) crude futures were down by $1.10, or 1.5 percent, at $72.07, having fallen to their lowest since Sept. 28. They dropped 2.4 percent in the previous session.
Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3 percent, its biggest one-day decline since February.
Technology shares tumbled on fears of slowing demand and concerns about US-China tensions. Japan’s Nikkei 225 was down more than 4 percent on Thursday.
“The clear risk-off mode that we are seeing across all markets is also hitting oil and those previous supply concerns have simply evaporated,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Volumes for Brent are four times the average for the Asian time zone, while WTI contracts were about 75 percent above typical turnover, McCarthy said.
“So, there is real commitment in the selling ... adding to the idea that we are seeing a turn in the market,” he said.
US crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said on Wednesday.
Crude inventories climbed by 9.7 million barrels in the week to Oct. 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, API said.
The US Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 a.m. EDT.
In the US Gulf of Mexico, producers have cut daily oil production by roughly 42 percent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production.
While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total US production,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
US oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.


Saudi Arabia has ‘no intention’ of 1973 oil embargo replay

Updated 21 min 4 sec ago
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Saudi Arabia has ‘no intention’ of 1973 oil embargo replay

  • Falih said that if oil prices went up, it would slow down the global economy and trigger a recession
  • Falih said Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million

LONDON: Saudi Arabia has no intention of unleashing a 1973-style oil embargo on Western consumers and will isolate oil from politics, the Saudi energy minister said on Monday amid a worsening crisis over the killing of Saudi journalist Jamal Khashoggi.
“There is no intention,” Khalid Al-Falih told Russia’s TASS news agency when asked if there could be a repetition of the 1973-style oil embargo.
Several US lawmakers have suggested imposing sanctions on Saudi Arabia in recent days while the kingdom, the world’s largest oil exporter, has pledged to retaliate to any sanctions with “bigger measures.”
“This incident will pass. But Saudi Arabia is a very responsible country, for decades we used our oil policy as responsible economic tool and isolated it from politics,” Falih said.
“My role as the energy minister is to implement my government’s constructive and responsible role and stabilizing the world’s energy markets accordingly, contributing to global economic development,” Falih said.
He said that if oil prices went up, it would slow down the global economy and trigger a recession. But he added that with Iranian sanctions coming into full force next month, there was no guarantee oil prices would not go higher.
“I cannot give you a guarantee, because I cannot predict what will happen to other suppliers,” Falih said, when asked if the world can avoid oil prices hitting $100 per barrel again.
“We have sanctions on Iran, and nobody has a clue what Iranians export will be. Secondly, there are potential declines in different countries like Libya, Nigeria, Mexico and Venezuela,” he said.
“If 3 million barrels per day disappears, we cannot cover this volume. So we have to use oil reserves,” he said.
Falih said Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million. He added that Riyadh had capacity to increase output to 12 million bpd and Gulf OPEC ally, the United Arab Emirates, could add another 0.2 million bpd.
“We have relatively limited spare capacities and we are using a significant part of them,” he said.
Global supply next year could be helped by Brazil, Kazakhstan and the United States, he added.
“But if you have other countries to decline in addition to the full application of Iran sanctions, then we will be pulling all spare capacities,” Falih said.