Oil prices fell more than $3 a barrel on Thursday, extending losses from the previous session, as investors in New York responded to signals of higher supply in the United States and expectations of weak energy demand in China.
Brent futures fell $2.60, or 3.2%, to $78.58 a barrel by 1526 GMT. U.S. West Texas Intermediate crude (WTI) shed $2.65, roughly 3.5%, to $74.01. Both benchmarks dropped by more than 1.5% in the previous session.
WTI’s front-month contract also traded below the price for the second month, a structure known as contango.
“Clearly, the decline in crude oil prices and the weakening of the structure is an ominous sign; one that implies an oversupplied physical market,” said Tamas Varga of oil broker PVM.
“Whether a drop of this magnitude is fundamentally justified remains a question, but the financial firepower of New York tends to exaggerate sentiment,” he told Reuters.
Oil tumbles on big US crude stocks build, record
OPEC and the International Energy Agency (IEA) have both predicted supply tightness in the fourth quarter, but U.S. data on Wednesday showed inventories were abundant.
The U.S. government Energy Information Administration said U.S. crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, far exceeding analysts’ expectations in a Reuters poll.
U.S. crude production held steady at a record 13.2 million barrels per day (bpd).
PVM’s Varga said October inflation data from major economic hubs, including Britain, the euro zone, the United States was potentially bullish.
Chinese economic activity also rallied in October as industrial output increased at a faster pace and retail sales growth beat expectations.
“The current price drop is taking place amid a seemingly auspicious backdrop, which suggests that investors simply do not buy into the ‘Q4 stock draw’ narrative; something that is not backed up by the recent weekly EIA reports either,” said Varga.
One of the factors giving investors pause is an expected slowdown in Chinese oil refinery throughput. Runs eased in October from the previous month’s highs as industrial fuel demand weakened and refining margins narrowed.
As the Israel-Hamas conflict appeared to be escalating in Gaza, U.S. officials on Wednesday said they would enforce oil sanctions against Iran, which has long been a backer of Hamas.
Comments
Comments are closed.