By David Gaffen
NEWYORK (Reuters) – Oil prices fell on Wednesday, with U.S. futures dropping below $70 a barrel for the first time in a month, after U.S. crude stockpiles rose 6.5 million barrels, almost triple what analysts had forecast, while exports dropped.
Oil had been rising this week on worries about Iranian sanctions and tensions between the United States and Saudi Arabia after the death of Saudi journalist Jamal Khashoggi.
U.S. crude oil <CLc1> slumped $2.17, or 3 percent, to settle at $69.75 a barrel.
“Today’s price decline to below our expected support at the $70 level would appear to set the trade up for a weaker pricing environment than we had anticipated,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Bob Yawger, director of futures at Mizuho in New York, said some speculators may have interest in getting out when prices are below $70, which could accentuate the downside.
Brent crude <LCOc1> also dipped below $80 a barrel but ended at $80.05, $1.36 or 1.7 percent lower. The global benchmark is trading nearly $7 below a four-year high of $86.74 reached on Oct. 3.
U.S. crude stocks rose 6.5 million barrels last week, the fourth straight weekly build, as exports were down to 1.8 million barrels per day, the U.S. Energy Information Administration said, in a report analysts characterized as bearish. [EIA/S]
Inventories rose sharply even as U.S. crude production slipped 300,000 bpd to 10.9 million bpd last week, which analysts attributed to the effects of offshore facilities closing temporarily for Hurricane Michael.
“A tick higher in refining activity and a drop in production due to hurricane activity in the Gulf was not enough to halt a fourth consecutive climb in stocks – and a solid one at that,” said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky.
The scandal over the disappearance of prominent Saudi critic and journalist Jamal Khashoggi, who disappeared two weeks ago after entering the Saudi consulate in Istanbul, had underpinned oil markets earlier in the week.
U.S. lawmakers pointed the finger at the Saudi leadership, suggesting sanctions could be possible.
Western pressure mounted on Riyadh to provide answers, but President Donald Trump’s comments suggested that White House may not take additional action against the Saudis, particularly after Saudi Arabia said it will conduct an investigation.
On Wednesday, Trump denied that he is giving cover to the Saudis, and that the results of the investigation into Khashoggi’s death should be known within a week.
Investors worry Saudi Arabia could use oil supply to retaliate against critics.
Ritterbusch of Ritterbusch and Associates said Saudi Arabia could cut as much as 500,000 bpd of crude production “as a warning shot” to discourage U.S. sanctions.
A claim by the United States that it aims to reduce Iran’s oil exports to zero is a “political bluff,” the head of the state-run National Iranian Oil Company was quoted as saying.
New U.S. sanctions on Iranian oil exports start on Nov. 4, while Iran has accused Saudi Arabia and Russia of breaking an OPEC-led agreement on output cuts by producing more crude.
(Reporting by David Gaffen in New York; additional reporting by Stephanie Kelly and Scott DiSavino in New York and Christopher Johnson in London; Editing by David Gregorio and Marguerita Choy)