Oil Tumbles On U.S. Stockpile Surge; Signs That Iran Worry Overplayed

Investing.com – Oil prices retreated on Thursday from their highest levels since 2014, a day after data showing the biggest U.S. crude stockpile build in 19 months and signs that worries about a supply squeeze from upcoming Iranian sanctions may have been overplayed.

London-traded crude for December delivery was down 1.8%, or $1.56, at $84.73 a barrel by 2:50 PM ET (18:50 GMT), retreating from an October 2014 peak of $86.74 reached Wednesday.

New York-traded West Texas Intermediate () crude for November delivery settled down 2.7%, or $2.08, at $74.33. It hit a November 2014 high of $76.90 in the previous session.

Most analysts have priced in a $100 target for Brent by 2019 on fears that U.S. sanctions on Iranian oil exports, due from Nov. 4, will cause a dire shortage of crude across the world. Iran, the third-largest oil exporter in the Organization of the Petroleum Exporting Countries (OPEC), produced a peak of 2.7 million barrels per day in May and could be prevented from shipping up to 1.5 million bpd under the sanctions.

The popular belief in the market is that the Saudi Arabia-led OPEC, and other major oil exporters such as Russia and the United States, will not be able to make up the lost supply from Iran as well as Venezuela and Libya, two other struggling OPEC members. Such fears persist despite a Reuters report this week that Russia and Saudi Arabia privately agreed in September to increase production and that U.S. officials were aware of the plan.

Thursday’s trade tempered some of the mania over Iran as the market reassessed a weekly inventory report released by the U.S. Energy Information Administration (EIA) on Wednesday.

U.S. rose by almost 8 million barrels last week, four times more than the 1.99 million forecast by analysts, the EIA report showed. It was the largest weekly inventory rise since March 2017, according to historical data retained by the agency.

While Brent and WTI were still up about 2% week to date, traders said the U.S. for September, due on Friday, might determine how they finish the week. The U.S. labor market is expected to have added 185,000 jobs last month vs. 201,000 in August.

“If the job numbers disappoint, then you’ll have the combination of last week’s eye-opening stock build and the substantial weakening of the WTI futures curve since yesterday to further pressure the market,” said Tariq Zahir at Tyche Capital Advisors, a New York energy trading firm that makes bets on spreads of U.S. crude.

Elsewhere in New York energy trading, gasoline fell 1.3% to $2.1040 a gallon. , which also represents diesel and distillates, slid 1.4% to $2.4020 a gallon. slumped 1.5% to $3.181 per million British thermal units after a bearish weekly inventory report.

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