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Oil Futures Tumble as US Crude Supplies Drop More Than Expected

October 4, 2017 at 16:52 by Andrew Moran

Oil prices are trading in the red in the middle of the trading week. Despite new government data showing a larger-than-expected decline in domestic stockpiles, traders are not diving into oil just yet, causing US crude to retreat to the crucial $50 threshold.

November West Texas Intermediate (WTI) crude futures dipped $0.32, or 0.63%, to $50.10 per barrel at 16:36 GMT on Wednesday on the New York Mercantile Exchange. US crude prices are poised to settle at their lowest levels since September 21.

Brent, the international benchmark for oil prices, is also bleeding red ink midweek. December Brent crude futures tumbled $0.24, or 0.43%, to $55.76 a barrel on London’s ICE Futures exchange.

US crude and Brent both posted a tremendous third quarter with gains of roughly 20%. Year-to-date, oil prices have declined just under 13%.

According to the US Energy Information Administration (EIA), domestic crude supplies dropped by six million barrels for the week ending September 29. Oil output remained relatively unchanged. Gasoline stockpiles climbed 1.6 million barrels, while distillate stockpiles slipped 2.6 million barrels.

It was further reported on Wednesday that the US exported 13.88 million barrels of oil last week, and many analysts are warning that the US could top 15 million barrels in the coming months.

This comes as reports show that the compliance rate among Organization of Petroleum Exporting Countries (OPEC) members decreased to 86% in September, down from 89% in August. In November 2016, the oil cartel agreed to freeze production levels at 1.8 million barrels per day (bpd) until March 2018 – reportedly, officials may extend the output freeze.

The international oil market has been experiencing a supply glut, stemming from the ongoing shale revolution in the US, which has offset OPEC’s efforts to slash production.

Oil futures are also benefiting from a weaker US dollar as the greenback slid 0.18%. A weaker US dollar is good for dollar-denominated commodities because it makes it cheaper for foreign investors to buy.

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