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US Crude Slumps on Third Straight Weekly Supply Build

October 2, 2019 at 18:25 by Andrew Moran

Crude oil futures are slumping midweek after the US government reported the third consecutive increase in weekly domestic inventories. Crude prices are also being weighed down on poor economic data, which could affect global oil demand. Despite the steep losses since the summer, oil is still in the green in 2019.

November West Texas Intermediate (WTI) crude oil futures tumbled $0.78, or 1.45%, to $52.85 per barrel at 18:09 GMT on Wednesday on the New York Mercantile Exchange. US crude prices recorded a 5% loss last month, paring their year-to-date gains to 15%.

Brent, the international benchmark for oil prices, is also sliding in the middle of the trading week. December Brent crude futures fell $1.08, or 1.83%, to $57.81 a barrel on London’s ICE Futures exchange. Brent slipped 3% in September, bringing its YTD gains to under 7%.

According to the US Energy Information Administration (EIA), domestic crude stockpiles climbed 3.1 million barrels for the week ending September 7, beating market forecasts of 1.3 million barrels. This is the third week in a row of a supply build. Gasoline supplies dropped by 200,000 barrels, while distillate inventories declined by 2.4 million barrels.

The US Baker Hughes total oil rig count came in at 713, down from 719 in the previous week.

The latest inventory data added to concerns that the international oil market is oversupplied. When you factor in disappointing economic readings in the US and the rest of the world, investors are bearish on the energy market.

On Tuesday, the Institute for Supply Management (ISM)’s manufacturing purchasing managers’ index (PMI) clocked in at 47.8 in September, down from 49.1 in August. This is the lowest reading since June 2009 and the second consecutive month of contraction.

It is unclear if the Organisation for Petroleum Exporting Countries (OPEC) will respond. Since January 2019, the 14-nation cartel agreed to slash output by 1.2 million barrels per day (bpd) until March 2020. OPEC and non-OPEC countries say that all available tools need to be utilized to ensure that the global energy market comes to balance and is stabilized.

Also, on the OPEC front, Ecuador announced that it would be departing from the bloc on January 1 because of fiscal issues. It would be the second nation to leave OPEC in the last year – Qatar quit the entity last year.

In other energy markets, December natural gas futures slid $0.03, or 1.31%, to $2.25 per million British thermal units (btu). November gasoline futures shed $0.025, or 1.55%, to $1.55 per gallon. November heating oil futures dropped $0.0225, or 1.2%, to $1.875 a gallon.

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