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Oil Adds to Losses After US Crude Supplies Record Unexpected Increase

August 1, 2018 at 19:06 by Andrew Moran

Crude oil futures are tumbling midweek after the US government reported an unexpected increase in domestic oil stockpiles. Oil prices are looking to rebound in August after enduring a 5.5% loss in July.

September West Texas Intermediate (WTI) crude futures shed $1.11, or 1.65%, to $67.66 per barrel at 18:41 GMT on Wednesday on the New York Mercantile Exchange. Year-to-date, US crude prices are up more than 14%, but they have lost their momentum over the last 30 days.

Brent, the international benchmark for oil prices, is also falling in the middle of the trading week. September Brent crude futures dipped $0.29, or 0.4%, to $72.61 a barrel on London’s ICE Futures exchange. Brent crude prices have been rallying in 2018, enjoying a 13% gain so far this year.

According to the US Energy Information Administration (EIA), US crude inventories climbed by 3.8 million barrels for the week ending July 2017, which surprised markets that had forecast a decline of 2.4 million barrels. US oil output decreased by 100,000 barrels to 10.9 million barrels per day (bpd). Gasoline stockpiles dropped by 2.5 million barrels, while distillate supplies surged 560,000 barrels.

On Tuesday, the Organization of Petroleum Exporting Countries (OPEC) announced that it has increased its crude production by 70,000 bpd to 32.62 million bpd – a record for 2018. There were already signs of surging output from Saudi Arabia, as well as non-OPEC member Russia. After more than a year of freezing production levels, OPEC and Russia agreed in June to start accelerating crude output by one million bpd to take advantage of higher prices.

Easing geopolitical tensions affected crude prices after President Donald Trump said he would speak with the Iranian leadership without any preconditions “whenever they want.” This is a complete reversal from previous all-cap comments he made on Twitter that essentially threatened Tehran. The Iranian regime responded that the US government should return to the nuclear deal that President Trump scrapped this past spring before a direct meeting takes place.

In other energy markets, September natural gas futures slipped $0.025, or 0.87%, to $2.758 per million British thermal units (btu). September gasoline futures shed $0.037, or 1.79%, to $2.043 per gallon. September heating oil futures fell $0.042, or 1.97%, to $2.095 a gallon.

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