Oil Down 11% In October, Biggest Loss in Over 2 Years

© Reuters. U.S. crude falls 11% in October for biggest drop since July 2016.

Investing.com - Oil prices in October posted their biggest monthly loss in nearly 2-1/2 years as investors shrugged off supportive U.S. supply-demand data and looming sanctions on Iranian crude exports amid the notion the market might be in a glut by next year.

A smaller-than-expected weekly build in U.S. crude stockpiles and encouraging gasoline and diesel consumption numbers initially sent oil prices higher Wednesday. But sentiment turned south at the end as investors appeared unconvinced that a U.S. oil embargo against Tehran beginning on Sunday would do much harm to supplies.

"The market wants to see better data, is in liquidation mode ... and most of the bulls never thought it would get to here," said Scott Shelton, broker at ICAP (LON:NXGN) in Durham, North Carolina. "At the same time, the bears are fitting the news to the price action and talking about demand destruction."

U.S. WTI crude settled down 86 cents, or 1.3%, at $65.31 per barrel

U.K. Brent , the international benchmark for oil, closed down 44 cents, or 0.6%, at $75.47.

Both crude gauges posted their biggest monthly loss since July 2016, with WTI falling 11% and Brent 9%.

The U.S. Energy Information Administration (EIA) said earlier on Wednesday that crude oil inventories rose by 3.22 million barrels last week vs. forecasts for a build of 4.11 million barrels. It was the first time in six weeks that crude stock increases turned out to be less than expected. Nearly 30 million barrels in surplus were accumulated in the five weeks prior.

Gasoline inventories for the week ended Oct. 26 fell by 3.16 million barrels, the EIA said, higher than expectations for a draw of 2.14 million barrels. Stockpiles of distillates, which included diesel and heating oil, was the outlier among products demand, decreasing by 4.05 million barrels vs. forecasts for a drop of 1.37 million.

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Oil bulls also warned that some 1.5 -2.0 million barrels per day (bpd) of global crude supply will be at risk after Iranian sanctions begin on Sunday, based on Tehran’s peak shipment of 2.5 million bpd in May.

“While the oil market is acting like the impact from the sanctions is (already) priced (in), get ready for the bulls to rise from the grave and scare the sanctions out of the bears,” Phil Flynn of Chicago’s Price Futures Group said.

“November is when the scary part begins. Refiners are coming out of maintenance and will be running at a record pace. Global oil supplies at the same time are going to be squeezed despite promises of more oil from Saudi Arabia,” said Flynn, adding that he expected Riyadh to produce an additional 300,000 bpd at most to compensate for the lost Iranian barrels.

Since President Donald Trump rescinded Iran’s nuclear deal with the West in May and reinstated sanctions on the world’s fourth-largest oil exporter, there have been doubts he could bring its oil sales to zero as he vowed.

Iran’s oil ministry said it has started selling crude oil to private companies in the country for export as part of a strategy to counter the sanctions. Other major importers of Iranian crude such as the EU and India are also looking for ways around the U.S. sanctions.

Refinitiv Eikon data distributed by Reuters on Tuesday showed that cumulative oil production by Russia, the United States and Saudi Arabia reached 33 million barrels per day (bpd) for the first time in September.

Separately, a Reuters survey on Wednesday showed OPEC pumped 33.31 million bpd in October, up 390,000 bpd from September and the highest by the group since December 2016.