Oil Prices Drop amid Large U.S. Stockpile Accumulation, Saudi Backlash
Oil prices extended losses on Wednesday after U.S. government data showed a bigger than expected rise in weekly crude inventories, possibly signaling a slowdown in demand for the world’s largest economy. Meanwhile, pressure on Saudi Arabia mounted as the kingdom launched an investigation into the disappearance and likely death of a prominent dissident.
Oil Prices Continue Lower
The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session low of $69.63 a barrel on the New York Mercantile Exchange. It was last seen trading at $69.80 a barrel, down $2.12, or 3%.
Brent crude, the international futures benchmark, bottomed at $79.17 a barrel on London’s ICE futures exchange. The futures price was last down $1.75, or 2.2%, at $79.66 a barrel.
A rising U.S. dollar placed downward pressure on commodity markets, which are largely denominated in the greenback. The U.S. dollar index (DXY), which tracks the performance of USD against a basket of six rivals, rose 0.4% to 95.41.
U.S. commercial crude inventories rose by 6.5 million barrels in the week ended Oct. 12, nearly three times higher than expected, according to the Energy Information Administration (EIA). The official figures contradict earlier data by the American Petroleum Institute (API), which showed a 2.1 million-barrels drop during the same week.
The U.S. imported an average of 7.6 million barrels of crude last week, data showed.
Despite the recent spike in commercial stockpiles, the market for commercial crude is expected to remain tight as the U.S. ramps up sanctions against Iran. A sharp drop in Iranian exports could propel crude prices higher in the medium term, with some analysts eyeing a return to $100 a barrel next year.
Saudi in the Spotlight
Saudi Arabia has faced a global backlash following the disappearance of Jamal Khashoggi, who was last spotted entering a Saudi consulate in Istanbul, Turkey. Although Saudi authorities have denied any involvement – sentiment that was shared by U.S. President Donald Trump – Turkish and American press have reported gory details of Khashoggi’s death.
Turkish officials have reportedly obtained audio recordings that prove Khashoggi was beaten, killed and dismembered at the consulate.
The Saudis have vowed to retaliate against Western critics who link Riyadh to the killing, including business leaders who are considering cutting ties to the kingdom. According to analysts, the oil-rich kingdom could slash crude exports by 500,000 barrels a day should the U.S. or any other nation pursue sanctions.
Featured image courtesy of Shutterstock.