Oil suffers biggest monthly loss in more than 2 years

Oil suffers biggest monthly loss in more than 2 years

 

Oil futures settled lower Wednesday as a weekly rise in U.S. crude supplies nearly matched market expectations and product stocks declined.

Prices also posted their biggest monthly percentage decline in more than two years as rising production and the potential for a slowdown in energy demand outweighed expectations for further declines in Iranian oil exports, with U.S. sanctions set to begin next week.

West Texas Intermediate crude for December delivery CLZ8, -0.60% fell 87 cents, or 1.3%, to settle at $65.31 a barrel on the New York Mercantile Exchange. Based on the front-month contracts, prices lost 10.8%, according to Dow Jones Market Data.

Global benchmark December Brent crude LCOZ8, -0.59% which expired at the settlement, fell 44 cents, or 0.6%, to $75.47 a barrel on the ICE Futures Europe exchange. Front-month contract prices declined by about 8.8% for the month of October.

Both Brent and WTI, which saw another settlement at their lowest in more than two months, suffered from their largest monthly percentage decline since July 2016.

The Energy Information Administration reported Wednesday that domestic crude supplies rose by 3.2 million barrels for the week ended Oct. 26. That followed five consecutive weeks of gains. Analysts surveyed by S&P Global Platts had forecast a rise of 3.3 million barrels, while the American Petroleum Institute on Tuesday reported an increase of 5.7 million barrels.

“Although [crude] refinery runs are clambering higher, away from the depths of maintenance season, there has still been a sixth consecutive build to oil inventories,” said Matt Smith, director of commodity research at ClipperData.

“In a similar fashion to last week, bullish draws to the products have acted as a counterweight to bearish sentiment,” he said, adding that half of the reported crude build came from another release from the Strategic Petroleum Reserve.

Gasoline stockpiles declined by 3.2 million barrels last week, while distillate stockpiles fell by 4.1 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply declines of 2.4 million barrels in gasoline and 2.2 million barrels for distillates.

November gasoline settled at $1.768 a gallon, down 2.1% for the session with prices, based on the front-month contract, tallying monthly loss of 15.9%. November heating oil HOX8, -0.38% tacked on nearly 0.1% to $2.262 a gallon, for a monthly decline of 3.8%. The November contracts expired at the day’s settlement.

December natural gas NGZ18, +0.34% rose 2.3% to $3.261 per million British thermal units, with prices up 8.4% for the month, based on the front month, according to Dow Jones MarketData.

Meanwhile, U.S. sanctions on Iran’s oil industry are set to take effect at the start of next week after President Donald Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of sanctions.

Perhaps, a more important question has been whether other producers will make up the lost supply. Saudi Arabia, the de facto head of the Organization of the Petroleum Exporting Countries, and leading producers outside the cartel, primarily Russia, agreed in early summer to begin ramping up crude production after more than a year of holding back. Comments in recent weeks by the Saudis that they could ramp up output at an event faster rate—reaching at least 11 million barrels a day—have further weighed on prices of late.

“Some market observers thought at the beginning of October that the price would climb to $100, begging the question of what has changed so fundamentally in the past 3-4 weeks,” said Carsten Fritsch and the commodities team at Commerzbank, in a note.

“What has changed above all is market sentiment, partly due to increasing concerns about demand as a result of the trade conflict between the U.S. and China and the latest price slide on the stock markets, though real demand data remained robust in September,” Commerzbank said. “The supply side has likewise played a role, with crude oil stocks in the U.S. having risen significantly for weeks. [while] Saudi Arabia, Russia and Libya scaled up their oil production noticeably in October. As a result, oil producers appear to be successfully offsetting the supply outages from Iran and Venezuela.”

Source: MarketWatch

https://www.marketwatch.com/story/crude-oil-tips-higher-but-is-about-to-log-a-9-october-retreat-2018-10-31

Published: 01-11-2018