Oil extends losses as other markets fall, stockpiles climb

Published: October 11, 2018 12:43:35

An oil tanker unloads crude oil at a crude oil terminal in Zhoushan, Zhejiang province, China, July 4, 2018. Reuters

Oil fell to two-week lows on Thursday as it extended big losses from the previous session amid a rout in global stock markets, with prices also hit by an industry report showing US crude inventories rose more than expected.

Supply worries also eased as Hurricane Michael likely spared oil assets from significant damage as it smashed into Florida, even as it caused at least one death, injuries and widespread destruction.

Brent crude LCOc1 futures were down $1.32, or 1.6 per cent, at $81.77 a barrel by 0543 GMT. They earlier touched their lowest since September 27 at $81.35, after closing 2.2 per cent lower on Wednesday.

US West Texas Intermediate (WTI) crude CLc1 futures were down by $1.10, or 1.5 per cent, at $72.07, having fallen to their lowest since September 28. They dropped 2.4 per cent in the previous session.

Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3 per cent, its biggest one-day decline since February.

Technology shares tumbled on fears of slowing demand and concerns about US-China tensions. Japan's Nikkei 225 .N225 was down more than 4 per cent on Thursday.

“The clear risk-off mode that we are seeing across all markets is also hitting oil and those previous supply concerns have simply evaporated,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Volumes for Brent are four times the average for the Asian timezone, while WTI contracts were about 75 per cent above typical turnover, McCarthy said.

“So there is real commitment in the selling ... adding to the idea that we are seeing a turn in the market,” he said.

US crude stockpiles rose more than expected last week, while gasoline inventories increased and distillate stocks drew, industry group the American Petroleum Institute said on Wednesday.

Crude inventories climbed by 9.7 million barrels in the week to October 5 to 410.7 million, compared with analyst expectations for an increase of 2.6 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.2 million barrels, API said.

The US Energy Information Administration (EIA) is due to release official government inventory data Thursday at 11 am EDT.

In the US Gulf of Mexico, producers have cut daily oil production by roughly 42 per cent due to the storm, the Bureau of Safety and Environmental Enforcement said. The cuts represent 718,877 barrels per day of oil production, according to Reuters news agency.

While production has been cut because of the hurricane, “down time is expected to be brief and Gulf of Mexico output now accounts for a comparatively small portion of total U.S. production,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

US oil output is expected to rise 1.39 million bpd to a record 10.74 million bpd, the EIA said in its monthly forecast on Wednesday.

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