US crude slumps below $70 a barrel after large stock build

19 October, 2018 12:00 AM printer

NEW YORK: Oil prices fell on Wednesday, with US futures settling below US$70 a barrel for the first time in a month, after US crude stockpiles rose 6.5 million barrels, almost triple what analysts had forecast, while exports dropped.

Oil had been rising this week on worries about Iranian sanctions and tensions between the United States and Saudi Arabia after the death of Saudi journalist Jamal Khashoggi.

US crude oil slumped US$2.17, or 3 per cent, to settle at US$69.75 a barrel, report agencies.

"Today's price decline to below our expected support at the US$70 level would appear to set the trade up for a weaker pricing environment than we had anticipated," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Bob Yawger, director of futures at Mizuho in New York, said some speculators may have interest in getting out when prices are below US$70, which could accentuate the selloff.

Volume was above average on Wednesday, with more than 627,000 US crude contracts changing hands, compared with a 10-month daily average of about 583,000 contracts.

Brent crude also dipped below US$80 a barrel but ended at US$80.05, US$1.36 or 1.7 per cent lower. The global benchmark is trading nearly US$7 below a four-year high of US$86.74 reached on Oct 3.

US crude stocks rose 6.5 million barrels last week, the fourth straight weekly build, as exports were down to 1.8 million barrels per day, the US Energy Information Administration said, in a report analysts characterised as bearish.

Inventories rose sharply even as US crude production slipped 300,000 bpd to 10.9 million bpd last week, which analysts attributed to the effects of offshore facilities closing temporarily for Hurricane Michael.

"A tick higher in refining activity and a drop in production due to hurricane activity in the Gulf was not enough to halt a fourth consecutive climb in stocks," said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky.