Crude Oil Prices Settle Lower on Surging Fuel Stockpiles

Investing.com – WTI crude oil prices settled lower Thursday as a draw in U.S. crude supplies was offset by sharp builds in product inventories.

On the New York Mercantile Exchange for October delivery fell 1.4% to settle at $67.64 a barrel, while on London’s Intercontinental Exchange, fell 0.79% to trade at $76.66 barrel.

Inventories of U.S. crude fell by 4.302 million barrels for the week ended Aug. 31, beating expectations for of 1.294 million barrels, according to data from the Energy Information Administration (EIA).

The large draw in crude supplies comes despite a modest climb in imports by about 0.500 million barrels per day (bpd), while exports declined by 0.271 million bpd, data from EIA showed.

Production was unchanged at 11.0 million bpd for the second-straight week, which also supported the draw in crude supplies.

Gasoline inventories by 1.845 million barrels, confounding expectations for a draw of 0.810 million barrels, while supplies of distillate — the class of fuels that includes diesel and heating oil — by 3.119 million barrels, against expectations for a build of just 0.742 million barrels.

The build in products emerged as refinery activity rose to 96.6% of their capacity last week from 96.3% the prior week, with crude inputs averaging about 17.65 million barrels per day during, up 0.081 million barrels from the prior week, the EIA said.

Oil prices were also pressured by concerns that U.S.-China trade war could intensify as traders await confirmation on whether the Trump administration will move ahead with a 25% tariff on $200 billion more of Chinese imported goods.

China, the world’s largest oil importer, has seen its economic growth wane in the wake of a trade dispute with the U.S., and some fear that another round of tariffs on Beijing could exacerbate the decline, pressuring oil demand growth.

Still, analysts continued to tout a bullish backdrop for oil prices, citing oil supply risk from looming U.S. sanctions on Iran’s oil industry, and the prospect of disruptions to domestic oil production, owing to U.S. hurricanes.

“Attempts by the three largest oil producers — U.S., Russia and Saudi Arabia — to manage oil markets to prevent further rises in oil prices, have been superseded by geopolitical supply-side concerns, with Iranian supply and U.S. hurricanes at the top of the list,” said MUFG analyst Ehsan Khoman.

President Donald Trump pulled the United States out of the Iran nuclear agreement in May, allowing sanctions against Iran to snap back into place. The first wave of sanctions went into effect last month and a second set of sanctions on Iran’s crude exports are slated for early November.

Oil-market observers will likely turn to the Baker Hughes rig count data Friday for signs that U.S. output continues to tighten after data on Wednesday showed U.S. oil output continued to expand.

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