Oil Under Pressure Due to Rising U.S. Inventories

Marco Green
September 20, 2018

LONDON-Oil prices were mainly flat Wednesday morning, as the market weighed an unexpected rise in USA inventories.

Brent futures LCOc1 also rose but the gains were more muted, as the global benchmark ended 37 cents, or 0.5 percent, higher at $79.40 a barrel.

U.S. West Texas Intermediate (WTI) crude CLc1 fell 0.20 percent, or 14 cents, to $69.71 a barrel. "I think that is going to remain the theme for the next six weeks until the next round of US sanctions against Iran kick off".

US crude inventories rose by 1.2 million barrels to 397.1 million in the week to September 14, according to data released on Tuesday by the American Petroleum Institute (API).

Prices rose on Tuesday amid media reports that Saudi Arabia, the world's largest oil exporter, was comfortable with prices climbing above $80 a barrel.

U.S. Energy Secretary Rick Perry told Reuters at the weekend that he did not expect any price spikes and that Saudi Arabia, the U.S and Russian Federation could between them raise global output in the next 18 months.

Refineries in the United States consumed about 17.7 million barrels per day (bpd) of crude oil last week while China's refiners used about 11.8 million bpd in August, according to government data from the countries, the most among the world's countries.

United States crude stocks increased by 1.2 million barrels according to the American Petroleum Institute (API), sharply reversing the market forecast of -2.7 million barrels, raising prospects for a widening premium in the Brent versus WTI with crude runs worsening in Europe and Asia.

OPEC is meeting soon to discuss output limits, which will give Saudi Arabia a chance to blame the USA for rising prices. Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

Oil prices on Wednesday pulled back from gains racked up the previous day, pushed down amid a surprise climb in USA crude stockpiles.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation meet on September 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply.

Iran's oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of USA sanctions that take effect in November.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early yesterday, a senior administration official told Reuters on Saturday.

Other reports by Click Lancashire

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