Oil prices dive on big US crude stock build, record output

Oil prices dive on big US crude stock build, record output

Texas (Reuters) -Due to a larger-than-expected increase in U.S. crude stocks, record output in the world’s largest producer, and growing concerns about demand in Asia, oil prices fell more than 1.5% on Wednesday.

For the first time since July, WTI’s front month contract was also lower than the second month, or in contango. It appeared that oil prices six months from now would surpass front-month contracts as well.

The weekly government statistics also revealed that U.S. crude output was staying at the record 13.2 million barrels per day that it reached in October. However, it was not released last week due to a systems upgrade.

John Kilduff, a partner at Again Capital LLC in New York, stated, “U.S. supply activity is headwind for the market, and U.S. is a problem for OPEC+.” He also stated that he did not believe Saudi Arabia could reduce additional output in order to raise prices.

Leading oil exporters Saudi Arabia and Russia, who are allies and members of OPEC+, the Organization of the Petroleum Exporting Countries, said this month that they would keep reducing their voluntary oil output until the end of the year.

Strong demand was indicated by the unexpected drop of 1.5 million barrels in U.S. gasoline stocks last week. At 1.4 million barrels, diesel inventories decreased more than anticipated.

OPEC and the International Energy Agency increased their estimates for this year’s growth in oil consumption on Tuesday, even though many major nations are expected to have slower economic development.

The demand for industrial fuel declined and refining margins contracted in October, causing China’s oil refinery throughput to decrease from the peak levels of the previous month. Even so, October saw a pick-up in economic activity due to faster-than-expected increases in industrial output and retail sales.

Japan’s GDP shrank from July to September, ending two quarters of growth based primarily on exports and lackluster spending.

For the first time in seven months, October saw a decline in U.S. retail sales.

The European Commission’s proposal to tighten the execution of a price restriction on the nation’s crude oil does not specifically target Russian oil ships, according to European Union diplomats.

According to earlier reports from the Financial Times, under new EU proposals, Denmark will be responsible for inspecting and possibly preventing Russian ships from sailing through Danish seas in order to enforce a $60 per barrel price restriction on Moscow’s petroleum.

(Editing by Marguerita Choy and David Gregorio; reporting by Arathy Somasekhar in Houston, Paul Carsten in London, and Sudarshan Varadhan and Laura Sanicola)

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