Crude Futures Fall for Second Day on U.S. Supplies, Dollar

Updated on
  • U.S. inventories increased by 2.85 million barrels last week
  • Saudi Arabia raises oil prices for Asia; cuts prices for U.S.

Crude fell for a second day as U.S. production remains stubbornly high.

U.S. supplies rose for a sixth week, the Energy Information Administration reported Wednesday. Prices also came under pressure as the dollar strengthened after Federal Reserve Chair Janet Yellen said a U.S. interest-rate increase remains a possibility for 2015. The stronger U.S. currency reduces the appeal of commodities as a store of value.

Crude has slumped about 40 percent in the past year, sliding as low as $37.75 a barrel in August on speculation a global glut will persist as the Organization of Petroleum Exporting Countries pumps above its collective target. U.S. crude stockpiles remain more than 100 million barrels above the five-year seasonal average. The Bloomberg Dollar Spot Index gained for a third day.

"Rising crude stockpiles and increasing output levels, combined with a stronger dollar, are putting pressure on the oil market," said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. "The fundamental picture is still bearish."

Ample Inventories

West Texas Intermediate for December delivery fell $1.12, or 2.4 percent, to $45.20 a barrel on the New York Mercantile Exchange. The contract lost $1.58 to $46.32 on Wednesday, the biggest decline since Oct. 12. The volume of all futures traded was 17 percent above the 100-day average.

Brent for December settlement declined 60 cents to $47.98 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $2.78 to WTI. The gap between the two crudes widened for the first time this week.

U.S. crude stockpiles increased by 2.85 million barrels in the week through Oct. 30, EIA said yesterday. Output expanded by 48,000 barrels a day to 9.16 million.

Saudi Arabia nudged pricing higher for December sales of all its crude grades to Asia, where refiners that buy its oil are earning bigger profits. The world’s largest crude exporter cut pricing for U.S. customers as it fights to retain market share.

Saudi Pricing

State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light crude to Asia by 30 cents to a discount of $1.30 below the regional benchmark, the company said in an e-mailed statement. Saudi Aramco, as the company is known, cut prices for Arab Light crude to the U.S. by 20 cents to a premium of 45 cents a barrel above the North American benchmark.

The kingdom produced 10.38 million barrels a day of crude in October, up 80,000 barrels from September, according to data compiled by Bloomberg.

Despite the ample U.S. inventories, supply constraints will push up oil prices, according to Andy Hall, who runs the $2.6 billion Astenbeck Capital Management hedge fund. Saudi Arabia is producing close to capacity while Iraq is struggling to maintain output, he said Wednesday at a conference in Chicago.

— With assistance by Ben Sharples

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