Oil Trades Near a Month Low After U.S. Crude Stockpiles Surge

Oil traded near the lowest level in a month after a bigger-than-expected gain in American stockpiles overshadowed tensions between the U.S. and Saudi Arabia over a missing critic of the kingdom.

Futures in New York fell 0.8 percent, after plunging 3 percent Wednesday. U.S. crude inventories rose 6.49 million barrels last week, the Energy Information Administration reported, more than twice the amount forecast in a Bloomberg survey. Even as the disappearance of dissident writer Jamal Khashoggi kept the market on edge, President Donald Trump cautioned against putting the entire U.S.-Saudi relationship at risk .

Crude bumped higher earlier this month as uncertainties persisted over whether the Organization of Petroleum Exporting Countries and its partners can offset supply losses from Iran after U.S. sanctions start in November. The gains were supported by tensions after Trump pledged “ severe punishment” should the Saudis be linked to Khashoggi’s disappearance. Still, expanding America stockpiles and concerns over demand have pegged prices back from a four-year high.

“Stocks are rising in the U.S., and the reason is because pipes out of the U.S. for exports are maxed out while U.S. production is rising,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.

West Texas Intermediate for November delivery traded 56 cents lower at $69.19 a barrel on the New York Mercantile Exchange at 10:15 a.m. in London. The contract declined $2.17 to $69.75 on Wednesday. Total volume traded Thursday was about 20 percent above the 100-day average.

Brent for December settlement was 72 cents lower at $79.33 a barrel on the London-based ICE Futures Europe exchange. The global benchmark was at a $10.16 premium to WTI for the same month, after settling at the highest level since June 11 on Wednesday.

Crude stockpiles in the U.S. have risen for four straight weeks in the longest run of gains since early 2017. Inventories in the storage hub of Cushing, Oklahoma, also increased by about 1.8 million barrels last week to more than 28 million barrels, the highest level in almost four months.

While Trump has repeatedly demanded that OPEC take action to lower oil prices, he considers Saudi Arabia an ally and reiterated on Wednesday that the kingdom agreed to buy $110 billion in U.S. weaponry last year. The Saudi response this week to Trump’s “punishment” pledge was read by traders as a warning that it could use oil as a political weapon.

“Despite the bullish talk, Saudi Arabia is very unlikely to pick the oil market as a means for retaliation,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich. “Constraining exports would be a blow to its carefully built credibility as a trustworthy supplier.”

Other oil-market news: The  Cboe/Nymex Oil Volatility Index increased 1.8 percent on Wednesday, the biggest in about a week. Production from America’s major shale plays is expected to rise by almost 100,000 barrels a day month-on-month in November, to 7.71 million barrels a day, according to the EIA’s monthly Drilling Productivity Report. Oil producers in the Permian Basin have started selling a  new stream of light crude, said people familiar with the matter, securing a market for the increasingly less dense oil being pumped from the largest U.S. shale play. Saudi Aramco will  buy a stake in an upcoming Chinese mega refinery, its latest investment in the world’s biggest oil market as it pursues a strategy of securing avenues for oil sales.