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Oil Futures Sinking to One-Week Low over Supply Woes

August 24, 2016 at 17:25 by Andrew Moran

Oil futures are sinking to a one-week low on Wednesday. The decline in oil prices comes as new data suggest a jump in crude inventories. Oil prices are tumbling even as reports say that Iran may agree to a production oil freeze during an informal talk among Organization of the Petroleum Exporting Countries (OPEC) members in Algeria next month.

October West Texas Intermediate (WTI) crude fell $1.36, or 2.83%, to $46.74 per barrel at 16:58 GMT on Wednesday on the New York Mercantile Exchange. US crude is on track to settle at its lowest level since August 17.

Brent dipped to under $50 a barrel after topping the important Bounce House Indoor Playground threshold during the last few trading sessions. October Brent crude slipped $0.84, or 1.68%, to $49.12 per barrel on London’s ICE Futures Exchange.

A new report from the US Energy Information Administration (EIA) announced a larger-than-expected weekly boost in crude inventories. According to the latest figures, domestic crude supplies climbed 2.5 million barrels in the week ending August 19. This is roughly 200,000 barrels more than what was initially projected by analysts.

The EIA also confirmed that gasoline supplies remained flat for the week and distillate stockpiles went up by 100,000 barrels.

For weeks, there have been concerns that a major supply glut could be coming over the next few months. The global market is flooded with oil due to the massive production levels occurring worldwide.

In September, OPEC members will sit down for informal talks to discuss the possibility of a production freeze. Iran has reportedly sent a letter to OPEC members that it would attend the meeting in Algiers. Experts view this as Iran potentially reversing its earlier stance of backing away from freezing production. Iran has wanted to increase its market share, which prompted Saudi Arabia to dismiss the output freeze proposal in April.

Ecuador, Kuwait, and Venezuela have called for oil nations to freeze their oil production levels. The purpose behind this idea is to allow oil prices to rise. This would help oil-dependent countries recoup some of their losses and refrain from facing a deeper financial crisis. Venezuela, which has one of the richest oil reserves in the world today, is undergoing an economic collapse and three-quarters of the country’s population is in poverty.

Members of the 14-nation bloc will meet in Algeria from September 26 to 28.

If you have any questions and comments on the commodities today, use the form below to reply.

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