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Oil Tumbles on EIA Data Showing Rise in US Crude Stockpiles

October 25, 2017 at 16:46 by Andrew Moran

Oil futures are tumbling midweek as new US government data found an increase in domestic crude stockpiles. The latest government data are completely opposite of what analysts and traders projected, causing oil prices to bleed red ink.

December West Texas Intermediate (WTI) futures slipped $0.51, or 0.97%, to $51.96 per barrel at 16:33 GMT on Wednesday on the New York Mercantile Exchange. US crude prices have been trading above the crucial $50 threshold for much of October.

Brent, the international benchmark for oil prices, dipped $0.31, or 0.53%, to $58.02 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), US crude supplies climbed by 900,000 barrels for the week ending October 20, which ends the four consecutive weeks of declines. Domestic crude production rebounded by 1.1 million barrels per day (BPD) and net imports rose by 500,000 bpd. Gasoline stockpiles fell by 5.5 million barrels, while distillate stockpiles dropped by 5.2 million barrels.

Investors are also paying attention to recent remarks from Saudi Arabian Energy Minister Khalid al-Falih, who said the country is looking to slash oil inventories in industrialized states to five-year average levels. He also suggested that the Organization of the Petroleum Exporting Countries (OPEC) may further expand the output freeze.

Since January, OPEC and other oil exporters have limited oil production to 1.8 million bpd. The agreement ends in March 2018, but there are many reports that the oil cartel will extend the pact. OPEC officials have been worried, though, about the reduction in the compliance rate in recent months.

Moreover, analysts are keeping an eye on the situation in Iraq, where there are tensions brewing between the central government and Kurdistan. There are fears that both sides may start a conflict, a development that would impact crude production and prices. Kurdish authorities have said earlier this week they are willing to suspend their push for independence, something that would avoid strained relations.

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