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Oil Down Again After First U.S. Stockpile Build in 7 Weeks

CommoditiesSep 10, 2020 03:55PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Oil prices fell back after a one-day reprieve on Thursday as the first U.S. stockpile build in seven weeks pushed back into negative territory a market trying to emerge from its worst two weeks since May.

New York-traded West Texas Intermediate, the key indicator for U.S. crude prices, settled down 75 cents, or 2%, at $37.30 per barrel. WTI lost 6.8% last week and is on track to shed another 7.5% this week.

London-traded Brent crude, the global benchmark for oil, closed the New York trading session down 73 cents, or 1.8%, at $40.06. Brent fell lost 6.6% last week and is on track to fall 5.3% this week.

Crude inventories increased by 2 million barrels last week, the Energy Information Administration said, reporting a build above the 1.3-million forecast by analysts. It was the first hike of its kind since the week ended July 17, with drawdowns within that period removing more than 38 million barrels from the market.

Gasoline inventories declined 2.9 million barrels, slightly more than expected, the EIA said, adding that distillate stocks fell by 1.7 million barrels, reversing all of the previous week’s build.

Yet, traders focused on the crude build amid concerns about refinery runs as the U.S. peak summer driving season draws to a close.

Refinery utilization fell 5% last week, the second time in a week that it has fallen as much. 

Cushing, Oklahoma, the delivery point for contracted barrels of WTI, saw a near 2 million-barrel build. Exports dipped slightly to below 3 million barrels per day. 

On the bearish side as well, the EIA raised output estimates for U.S. crude by 300,000 barrels per day to 10 million bpd, accounting for the redeployment of production platforms on the Gulf Coast of Mexico that were preemptively shut during last month’s Hurricane Laura.

Oil market economics were clouded over the past four months by euphoria more than statistics attesting to business reopenings from Covid-19 lockdowns. 

Tepid U.S. jobs recovery since July — despite unemployment returning to single digit — and a resurgent dollar that’s anything but good for commodities had capped crude in the low $40s. 

The floor finally came off the market last week after OPEC kingpin Saudi Arabia cut the selling price of its oil, ostensibly to preserve or widen its market share. The Saudi move came weeks after OPEC’s global producer alliance called OPEC+ said it was winding back production cuts observed since May. 

Those ominous actions were followed by U.S. refiners slashing their crude utilization just as the peak summer driving season drew to a close.  The return of the Dollar Index to its bullish 93-handle and a stocks rout on Wall Street completed a perfect storm for crude longs.

Oil Down Again After First U.S. Stockpile Build in 7 Weeks
 

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Comments (9)
Badamasi Musa
Badamasi Musa Sep 10, 2020 8:17PM ET
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hey
Camaro Camero
Camaro Sep 10, 2020 7:26PM ET
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Goody! More shares for me. 2021 will be an OUTSTANDING year.
Jesse Mulliniks
Jesse Mulliniks Sep 10, 2020 6:48PM ET
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Never forget that neither political party cares about you. It is one big puppet show distraction. Wall street is in control and they never lose.
Chris Sundo
Chris Sundo Sep 10, 2020 3:55PM ET
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Oil often goes in the direction of the general market. General market needs a sell-off? then oil goes down and the news for oil are interpreted to explain oil's move. Hilarious
Barani Krishnan
Barani Krishnan Sep 10, 2020 3:55PM ET
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Where and which cave have you been hiding in? Look at the crude utilization number, then ask yourself why the market is acting so. Every variable of the past two months is in the story as well, if you need better education.
frank Linares
frank Linares Sep 10, 2020 3:55PM ET
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Barani Krishnan actually, when oil was going up almost at $45 and stockpile was less than predicted, oil was still going down, manual manipulation to take prople’s money.
Barani Krishnan
Barani Krishnan Sep 10, 2020 3:55PM ET
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frank Linares  Perhaps, the goings-on behind the scenes cannot always be quantified. But it's also ridiculous for Sundo to say today's move wasn't data-related.
Imran Chaudhry
Imran Chaudhry Sep 10, 2020 11:48AM ET
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Sell or buy?
Neil Smit
Neil Smit Sep 10, 2020 11:48AM ET
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Buy
Plopseven Schwartz
Plopseven Schwartz Sep 10, 2020 11:24AM ET
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Oil at the gas station today was $2.19 lol
Raja Dhillon
Raja Dhillon Sep 10, 2020 11:23AM ET
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In next 2 weeks oil prices will rise in my opinion.
Raja Dhillon
Raja Dhillon Sep 10, 2020 11:23AM ET
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In next 2 weeks oil prices will rise in my opinion.
Chinese Flu
Chinese Flu Sep 10, 2020 11:13AM ET
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391 million to 1.8 million? Can't be right.
 
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