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Oil Slumps as Iran Nuclear Talks Resurface, US Crude Stocks Rise

CommoditiesOct 27, 2021 03:25PM ET
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© Reuters.

(Updates with settlement prices)

By Barani Krishnan

Investing.com - Crude prices fell 2% on Wednesday as the possibility of Iran holding nuclear talks with Western powers returned to headlines, amid Tehran’s bid to free itself from U.S. sanctions prohibiting the sales of its oil to the world.

A weekly build in U.S. crude stockpiles also weighed on the market as the EIA, or Energy Information Administration, reported an inventory level double to market expectations. The rise came as refiners boosted raw oil imports last week to make more products like gasoline and diesel, while exporters of crude shipped out less.

U.S. crude’s West Texas Intermediate benchmark settled down $1.99, or 2.4%, at $82.66 per barrel. It was the largest one-day dip in three weeks for the WTI, which hit a seven-year high of $85.41 on Monday.

London-traded Brent crude, the global benchmark for oil, finished the session down $1.82, or 2.1%, at $84.58. Brent hit a three-year high of $86.70 on Monday.

Crude prices fell as Iran's top nuclear negotiator said on Wednesday that Tehran’s talks with six world powers, aimed at reviving its 2015 nuclear deal, will resume by the end of November. The last time the parties met was in June.

U.S. crude stockpiles, meanwhile, rose by 4.27 million barrels during the week to Oct. 22, after the previous week’s decline of 431,000, the EIA’s Weekly Petroleum Status Report showed. 

Analysts tracked by Investing.com had expected a rise of around 2 million barrels for the week, putting what the EIA reported at almost double to expectations. In three weeks prior, crude inventories had risen without stop, building by a total of around 13 million barrels.

But in the grander context of the oil market, these were fleeting factors without the promise of lasting long enough to bring a meaningful correction to crude prices. 

For instance, Iran’s hardline regime President Ebrahim Raisi has constantly upended Western efforts to reign in the Islamic Republic's nuclear program.

And while U.S. crude inventories may have risen in the latest week, stockpiles at the Cushing, Oklahoma storage hub — a more important metric sometimes to the market — fell to a new three-year low. Gasoline stockpiles also slid again for the week.

“The near 4.3 million barrel crude build in the latest week might look big, but in the bigger scheme of what’s going on, it’s nothing as the U.S. supply situation of crude is still way below the weekly need for petroleum products such as gasoline and diesel,” said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.

The EIA data showed that crude oil imports rose by 430,000 barrels per day, or 3 million on the week, while exports fell by 273,000 barrels daily or a combined 1.9 million on the week.

On the other hand, gasoline stockpiles fell by almost 2 million barrels last week, adding to the previous week’s draw of 5.37 million.  Inventories of distillates, which included diesel, slipped by 432,000 barrels after a decline of 3.9 million the week prior.

In Cushing, almost 4.0 million barrels of crude vanished last week. As long as there aren't adequate weekly fills at Cushing, any hope of balancing crude supply with product demand will be futile. 

For perspective, over the past 10 weeks, any daily correction of 1-2% on WTI or Brent has often been overturned by a 4-5% surge by the end of the week.

While the current narrative in oil is overwhelmingly bullish, often the littlest of positive developments are magnified by those on the long side of the trade to blow the rally out of proportion.

Helping the oil narrative is, of course, producer cartel OPEC+ whose mission is to ensure that global output of crude remains at about a fifth of immediate needs. In any ordinary market, that would be deemed as deliberate stifling of natural production to create a lopsided market. But in OPEC terminology, it’s called “rebalancing”.

(With additional reporting by Sam Boughedda) 

Oil Slumps as Iran Nuclear Talks Resurface, US Crude Stocks Rise
 

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Comments (8)
Rodney Dangerfield
Rodney Dangerfield Oct 28, 2021 1:15AM ET
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89% of stocks are owned by those in the top 10% of wealth in the United States
Darryl Allen
Darryl Allen Oct 27, 2021 6:29PM ET
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I like Barani's articles. If you don't, he'll set you straight in the comments. lol
Barani Krishnan
Barani Krishnan Oct 27, 2021 6:29PM ET
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Ha ha ... that's a mixed compliment there, but I'll take it! Thanks much, Allen sir! :)
Barani Krishnan
Barani Krishnan Oct 27, 2021 3:45PM ET
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Judging by the number of thumbs-down that even factual statements are getting here, it's obvious how many choked-up-to-the-eyeballs longs that we have here. Quite amusing actually.
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William Bailey
William Bailey Oct 27, 2021 3:45PM ET
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The Fed and our goverment was pushing money to the wealthiest Americans and corporations under cover of pamdemic ( literally wealthy people walling on dead bodies of covid deaths to legally steal stim ) to boost stocks and Trump threatend Opec to get them to cut oil production..we cant even pay our debt and congress refusing to tax someone to pay the debt = looming disaster for all markets … a week , or a few months boom
Arjun Reddy MallikArjunreddy
Arjun Reddy MallikArjunreddy Oct 27, 2021 3:45PM ET
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Barani Krishnan Sir..I want your suggestionon ONGC & OIL INDIA COMPANIES Shares..I have shares of these companies, Sir please suggest me sell or hold
Barani Krishnan
Barani Krishnan Oct 27, 2021 3:45PM ET
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Arjun Reddy MallikArjunreddy  Hello there, I don't really focus on equities and would have to ask my colleagues in that space for help. I have some insights on the different https://investing components of energy sector but I think you need real expert advice here. Let me see if I can get someone to help. Bests.
Arjun Reddy MallikArjunreddy
Arjun Reddy MallikArjunreddy Oct 27, 2021 3:45PM ET
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ok Sir, tell me about oil prices will increase in coming days or not
Barani Krishnan
Barani Krishnan Oct 27, 2021 3:45PM ET
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Arjun Reddy MallikArjunreddy  I don't trade and have no positions in any market to ensure my writing is free of bias (also helps me sleep at night). That said, I'm NOT a fan of high oil prices given their tax on the economy, especially at north of $60 a barrel. Thus, I'm for $20 reduction. But I'm aware we're likely to get a $20 hike instead given the prevailing insanity on the market, not helped in the least by the Saudis who are egging it on. If you're long, enjoy the ride as long as you can.
Jose Maderno
Jose Maderno Oct 27, 2021 3:30PM ET
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Reuters trying to justify why oil should be lower, even tho the current administration has terminated multiple drilling programs on federal land.  Reuters has been talking oil down since it was at $40.  They do have such an impact on the markets, eh?
Barani Krishnan
Barani Krishnan Oct 27, 2021 3:30PM ET
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This is an Investing.com story, not Reuters. Go and bark at Reuters, not my report. By the way, every report out there has almost the same story today: that a correction is overdue.
Jose Maderno
Jose Maderno Oct 27, 2021 3:30PM ET
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My bad... I thought I clicked on the Reuters story under the heading Oil drops more than 1% as U.S. stockpiles rise sharply
Barani Krishnan
Barani Krishnan Oct 27, 2021 3:30PM ET
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Jose Maderno  Ok, no worries. Apols fot coming on harder but this has been happening once too often, not just you, but others as well. I get it: Reuters isn't conservative. Their job is to report on the financials and that's what they, Bloomberg and the rest do.
Jose Maderno
Jose Maderno Oct 27, 2021 3:30PM ET
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Years ago, Reuters had billable products that I gladly paid for to get reliable information that provided both sides of any investment decision.  They were early at providing information over the internet.  Sadly, that is not what they produce today.  Financial information shouldn't be right or left.  It should be informative.  I don't believe I will ever forgive them for dropping their once very high standards.
William Bailey
William Bailey Oct 27, 2021 1:10PM ET
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Be glad that a whacktard republican isnt president , or we would be unlawfully invading and occupying amd murdering the population of another country to boost oil prives and put the US in deeper debt !!
Yup Tub
Yup Tub Oct 27, 2021 1:10PM ET
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Bush did but Trump didn't.
Darryl Allen
Darryl Allen Oct 27, 2021 1:10PM ET
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Are we pretending Obama didn't bomb every country from Libya to Afghanistan?
James Pattison
James Pattison Oct 27, 2021 12:50PM ET
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Oklahoma oil stores are empty… we are headed for a total oil shortage… just like jimmy carter… stagflation here we come
William Bailey
William Bailey Oct 27, 2021 12:50PM ET
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Republicans teaming with big oil to hurt the economy when democrats control the US !!!
Xeefey Cali
Xeefey Cali Oct 27, 2021 11:53AM ET
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xeef tractor work shop company
Jay Means
Jay Means Oct 27, 2021 11:36AM ET
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Cushing was way down gas diesel ho way down up we go
 
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