Oil prices fall amid surprise growth in US crude stocks

Lloyd Doyle
September 19, 2018

U.S. West Texas Intermediate (WTI) crude futures were up 20 cents, or 0.29 percent, at $70.05 a barrel, having climbed 1.4 percent the day before.

Oil prices inched up on Wednesday as concerns that producers may not be able to cover a shortfall in supply once US sanctions on Iran kick in outweighed a gain in USA stockpiles.

Reuters reported on September 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until US congressional elections.

Data from the InterContinental Exchange showed open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by almost 45 per cent on Monday and Tuesday to an equivalent of 54 million barrels of oil.

"It may also suggest they don't have the ability to make up for the losses that are already stemming from impending US sanctions on Iran".

Crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, EIA data showed.

Yesterday, Russian Energy Minister Alexander Novak said all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month.


Meanwhile, oil output from seven major US shale formations is expected to rise by 79,000 bpd to 7.6 million bpd in October, the US Energy Information Administration said on Monday.

Brent may fall more than $1 to $76.37 a barrel, while WTI crude prices may revisit their September 14 low of $67.94, he wrote.

The focus on oil supply has been reflected in the options market this week, where investors have scooped up large amounts of buy or call options, suggesting they see prices rising.

USA sanctions affecting Iran's petroleum sector will come into force from November 4, though many buyers have already curbed their purchases, raising questions about how the market will make up the lost supply.

USA stock indexes broadly fell on Monday, weighing on oil futures, on expectations that the Trump administration would go ahead with the new tariffs and that Beijing would retaliate.

Technical analysis from Reuters market analyst Wang Tao showed that USA oil prices have repeatedly failed to overcome a resistance level of $69.85 per barrel, signalling a dissipation of positive outlook.

In a move heavily opposed by Iran, OPEC and other oil producers including Russian Federation agreed in June to boost crude output by around a million barrels a day, reversing course after supply cuts that had cleared a global glut and boosted prices.

Other reports by Iphone Fresh

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