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Oil Drops After Largest Weekly Jump in Supplies in 2018

October 3, 2018 at 15:03 by Andrew Moran

Oil futures are taking a bit of a breather from their latest efforts to top four-year highs. The US government reported that domestic inventories recorded their largest weekly increase in 2018, sending crude prices plunging in the middle of the trading week.

November West Texas Intermediate (WTI) crude oil futures tumbled $0.86, or 1.14%, to $74.36 per barrel at 15:41 GMT on Wednesday on the New York Mercantile Exchange. Prior to the release of the report, US crude prices appeared to be heading to their best levels in four years, climbing 3.3% over the last five trading sessions.

Brent, the international benchmark for oil prices, is also falling midweek. December Brent crude futures slid $0.61, or 0.73%, to $84.19 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), domestic crude stockpiles surged by eight million barrels for the week ending September 28, beating market forecasts of 2.7 million barrels. This is the largest weekly jump so far in 2018. Gasoline inventories slumped by 500,000 barrels, while distillate supplies decreased by 1.8 million barrels.

The Baker Hughes total rig count stood at 1,054, up from 1,053 last week.

Crude investors are paying attention to Hurricane Leslie, a weather event that has strengthened just east of Bermuda. Should Leslie make landfall in the US, it could potentially damage oil infrastructure.

Traders are patiently waiting for the impact of the US government’s move to withdraw from a 2015 international agreement to limit Iran’s nuclear program. Instead, Washington will reimpose economic sanctions on one of the largest oil producers in the world next month. Investors are bracing for higher oil prices since the Organization of the Petroleum Exporting Countries (OPEC) has suggested that it will not offset Tehran’s lost production levels.

Oil’s midweek woes were amplified on a rising US dollar as the greenback advanced 0.12% to 95.60. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

In other energy markets, November natural gas futures tacked on $0.07, or 2.18%, to $3.23 per million British thermal units (btu). November gasoline futures dipped $0.02, or 0.84%, to $2.11 a gallon. November heating oil futures were flat at $2.40 per gallon.

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