Oil Drops Amid Contradictory Estimates for U.S. Crude Stockpiles

Oil fell as traders weighed contradictory assessments of U.S. crude inventories before the release of government data later Wednesday.

Futures slid 0.8 percent in New York. The American Petroleum Institute was said to report a 2.13 million-barrel drop in stockpiles, while a Bloomberg survey forecast a 2.5 million-barrel gain. Meanwhile, tensions persisted between the U.S. and Saudi Arabia over missing journalist Jamal Khashoggi, with President Donald Trump facing pressure to act against the Saudi regime.

Crude has increased almost 20 percent this year on concern that U.S. sanctions on Iranian crude — as well as supply losses in Venezuela and elsewhere — will leave global markets stretched. While the Organization of Petroleum Exporting Countries and its allies insist they’re committed to raising output, questions remain over their spare capacity. Meanwhile, geopolitical tensions continue to hound sentiment, with the trade war ongoing between the U.S. and China.

“Our basic premise is that prices will move higher,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London. “As Iran’s supply losses are fully realized and Venezuela suffers continuous decline, global spare production capacity will ebb and — against a backdrop of average inventories — the market will become more sensitive to adverse supply shocks.”

Stockpile Signals

West Texas Intermediate for November delivery traded down 60 cents at $71.32 a barrel on the New York Mercantile Exchange at 8:34 a.m. local time. Total volume traded was about 3 percent below the 100-day average.

Brent for December settlement slipped 46 cents to $80.95 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $9.73 premium to WTI for the same month.

Crude stockpiles at the storage hub of Cushing, Oklahoma, rose by 1.5 million barrels last week, according to the API. That would be the fourth consecutive increase if confirmed by the Energy Information Administration’s data Wednesday.

Traders also continued to weigh tensions between Saudi Arabia and the U.S., after speculation grew that OPEC’s top producer could use its oil as a weapon against any punitive measures taken by Trump. U.S. Secretary of State Michael Pompeo, who met with Saudi Arabia’s leadership, said it demonstrated a “serious commitment to determine all the facts” around the disappearance of Saudi dissident Khashoggi after he entered the country’s consulate in Turkey.

Other oil-market news: Iraq’s state-run Oil Marketing Co. is said to be  asking buyers of its Basrah crude to specify the final destination country for its cargoes, an effort aimed at curbing resales. Unipec has been selling U.S. crude to third parties in Asia and Europe even as it halted shipments in August to parent Sinopec, which operates China’s largest refining system, according to a person familiar.