Oil falls as USA crude inventories jump unexpectedly

Daniel Fowler
August 15, 2018

Crude prices have dipped in recent weeks, reflecting less worry about supplies following increased output by Russian Federation and several OPEC nations, the International Energy Agency said in its latest monthly report about the global oil market.

Yet their shipped imports in July were about half a million barrels per day (bpd) below their Jaunary-June average of 12.4 million bpd, shipping data shows.

Brent crude futures were down $1.96 a barrel at $70.50 a barrel by 11:07 a.m. EDT.

"The key risk to oil is the contagion risk to other emerging markets, especially those representing a major share of demand growth", said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S. Traders "are most certainly looking for Turkey to contain the situation and come up with viable solutions".

On Friday, the International Energy Agency (IEA) warned the energy market outlook could become "far less calm" as US -imposed oil sanctions against Iran take effect.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished slightly lower on Tuesday after giving back earlier gains. USA light crude was up 90 cents at $68.10.

United States ambassador urges UK to back Trump on Iran nuke deal
Johnson wrote in his article that British businesses should cut all trade ties with Iran and help the U.S. form a "united front".

Oil traders will stay focused on a plethora of bearish factors now weighing on the market in the week ahead, after United States (U.S.) crude prices suffered their sixth straight weekly loss last week - their worst losing streak since August 2015. Analysts expect a 1.7 million-barrel drop in crude stocks for the week ended August 10. Despite the United States rig count being at a high for this year, the "production level has stalled, and that raises questions on whether or not there's capacity for the U.S. to increase production further - which is why we're seeing firmer markets".

For the moment the IEA did not change its forecast for global demand for oil to increase by 1.4 mbd.

The futures markets were further weakened late in the session after data from industry group the American Petroleum Institute (API) showed that US crude stocks unexpectedly rose by 3.7 million barrels the week-ending August 10, compared with analysts' expectations for a drawdown of 2.5 million barrels.

Beyond the darkening economic outlook, Phillip Futures said hedge funds had reduced bullish bets because of "rising production levels from OPEC and the United States".

Brent crude has fallen back to about $72 a barrel as the questions over demand have offset concerns over supply disruptions, such as United States sanctions on Iran, which had helped to propel the global oil benchmark to highs of $80 a barrel in May.

Iran is the third-largest producer in the Organisation of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq, pumping 3.65 million bpd in July, media data show.

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