Oil set for weekly loss as supplies allay Saudi Arabia tensions

By: | Published: October 19, 2018 7:47 PM

Oil headed for a weekly loss as plentiful supplies helped offset worries that tensions between Saudi Arabia and the U.S. over the disappearance of a journalist could lead to the use of crude as a political weapon.

Oil, Saudi Arabia, oil export, oil crisis, hike in oil price, WTI crude contract, Exxon Mobil CorpCrude has retreated about 10 percent from the four-year high hit earlier this month on concern that high prices will hurt fuel demand, particularly in emerging economies already beset with other financial strains. (Reuters)

Oil headed for a weekly loss as plentiful supplies helped offset worries that tensions between Saudi Arabia and the U.S. over the disappearance of a journalist could lead to the use of crude as a political weapon. Futures have lost 3 percent in New York this week. Saudi Arabia — the world’s biggest oil exporter — issued a veiled threat about using its position as a major crude supplier if the kingdom is punished for the disappearance of critic Jamal Khashoggi. Analysts however doubted the crisis would go that far. Concern receded further as U.S. government data showed crude inventories grew last week by more than double the level analysts forecast.

Crude has retreated about 10 percent from the four-year high hit earlier this month on concern that high prices will hurt fuel demand, particularly in emerging economies already beset with other financial strains.

“Sentiment in the futures market seems to have cooled,” said Carsten Menke, an analyst at Bank Julius Baer & Co. in Zurich. “Signs of ample supplies triggered profit-taking among speculative traders such as hedge funds.”

West Texas Intermediate for November delivery traded 59 cents higher, or 0.8 percent, at $69.24 a barrel on the New York Mercantile Exchange at 9:10 a.m. in New York. The contract declined 1.6 percent to $68.65 on Thursday. Total volume traded was about 3 percent below the 100-day average.

The front-month WTI crude contract traded 16 cents lower than those for December, after flipping on Thursday into a market contango for the first time since May. That signals oil traders are turning less optimistic on the near-term direction of the market.

Brent for December settlement was at $80.09 a barrel on the London-based ICE Futures Europe exchange, up 80 cents. The contract fell 1 percent to $79.29 on Thursday, and is down 0.4 percent for the week. The global benchmark’s premium was $10.76 to WTI for the same month.

In the U.S., the Energy Information Administration said nationwide crude inventories rose by 6.49 million barrels last week, more than the 2.5 million-barrel increase forecast in a Bloomberg survey. Stockpiles have risen more than 22 million barrels over the past four weeks as domestic drillers ramp up production, while refineries halt operations for seasonal maintenance.

While oil’s surge has subdued, the ongoing conflict between America and Saudi Arabia supported prices earlier this week. President Donald Trump told reporters Thursday that his administration is waiting for the result of investigations as it decides how to respond amid reports that U.S.-based journalist Khashoggi was ambushed inside the Saudi consulate in Istanbul more than two weeks ago.

Trump said it “certainly looks” like Khashoggi is dead and warned of “ very severe” consequences for the killing. Treasury Secretary Steven Mnuchin also withdrew from an investment conference in Riyadh after Secretary of State Michael Pompeo briefed him and Trump following a hastily planned trip to Saudi Arabia and Turkey on Monday.

Other oil-market news: Russia has begun discussions with Exxon Mobil Corp. on possible new oil and gas projects, potentially creating a dilemma as the U.S. government mulls more sanctions against the country. China’s daily oil refining rose 5.4 percent month-on-month to a record level in September, according to Bloomberg News calculations based on National Bureau of Statistics data. Asian buyers of Iranian oil are gaining confidence they will win U.S. consent for some imports to continue even after American sanctions snap back next month.

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