Oil Drops Amid Signs of Mounting Supply From Arabia to U.S.
By Jessica Summers (bloomberg.com) / July 16 2018
After touching a 40-month high just two weeks ago, oil has fallen by more than 10 percent as global trade anxiety combined with a Saudi offer of added crude for Asia to boost market volatility.
Futures in New York fell 4.2 percent on Monday following last Wednesday’s 5 percent tumble, results that together ramped up a measure of volatility to its highest in about a year.
The latest decline comes as Saudi Arabia is offering more crude cargoes to Asian customers, according to people familiar with the matter. In the U.S., President Donald Trump was said to be considering tapping the nation’s emergency oil supply to tame rising fuel prices. Between them, the kingdom and the U.S. pump about one-fifth of the world’s crude.
“It very much seems like a continued reaction to potential supply increases,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. “The combination of the supply-side effect and the potential for less demand as a result of trade woes that we’re seeing, are prompting people to take some of the long bets off oil right now.”
As Saudi Arabia took steps to fulfill its pledge to offset supply losses from other OPEC states, Russian Energy Minister Alexander Novak said the cartel and its allies could boost output by more than 1 million barrels a day if needed. At the same time, investors focused on the trade tensions between the U.S. and China that could threaten energy demand.
West Texas Intermediate crude for August delivery dropped $2.95 to settle at $68.06 a barrel on the New York Mercantile Exchange, the lowest level in three weeks.
Brent for September settlement dropped $3.49 to end the session at $71.84 on the London-based ICE Futures Europe Exchange, and traded at a $4.77 premium to WTI for the same month. The global benchmark closed below its 100-day moving average for the first time since March, a bearish signal.
The Trump administration was reviewing options ranging from a 5 million-barrel test sale to a larger release of 30 million barrels from the Strategic Petroleum Reserve. Meanwhile, a senior Iranian official urged Trump not to use the emergency stockpiles and urged the American president to drop sanctions.
“It seems like we have all these supply side stories coming out of the blue,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. “Short term, it’s very bearish.”
Oil-market news:
- Gasoline futures fell 5 percent to settle at $2.0022 a gallon, the lowest since April.
- Cushing, Oklahoma crude supplies fell 700,000 barrels last week, according to a forecast compiled by Bloomberg.
- U.S. crude stockpiles are seen dropping 3.05 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.
- Libya’s El-Feel oil field was said to pump 70,000 barrels a day, according to a person familiar with the situation.
