Published: Sat, November 03, 2018
Finance | By Kristine Clayton

Oil prices fall 2 percent on rising supply and trade war

Oil prices fall 2 percent on rising supply and trade war

USA light crude was 22 cents higher at $66.40 US a barrel mid-morning Wednesday, having hit a two-month low of $65.33 a barrel on Tuesday.

Brent has fallen by over 12 percent since the beginning of October, while WTI has lost more than 13 percent in value. Saudi Arabia raised production by 150,000 barrels a day to 10.68 million a day, the highest in Bloomberg data going back to 1962, while Iranian volumes slipped by 10,000 barrels a day to 3.42 million.

Crude futures traded choppily on Wednesday, with Brent rising by $1 a barrel earlier in the session before retreating.

President Donald Trump's threat to sanction foreign firms that buy Iranian barrels beyond his November 4 deadline has wiped roughly a third of Iran's oil exports off the market.

The report also warned that a slowdown in China painted "a subdued picture of economic growth and offers little support to the prices of industrial and energy commodities". Namely, US production levels.

U.S. commercial crude oil stockpiles in the week ending October 19 rose 6.3 million barrels week on week while total petroleum inventories dropped as much as 8 million barrels, according to data issued by the U.S. Energy Information Administration (EIA) on Wednesday.

US crude oil production reached 11.3 million barrels per day (b/d) in August 2018, according to EIA's latest Petroleum Supply Monthly, up from 10.9 million b/d in July.

As sanctions take effect, buyers for Iran's crude will dry up.

On Thursday, oil prices rose as investors were encouraged by a strong rebound in the US stock markets. The rise in USA oil production to an all-time high of 11.2 mln bpd also weighed on global prices of the fuel. WTI picked up 0.26 dollar to settle at 67.59 dollars a barrel. The third week saw steeper fall in crude oil price as news of Saudi journalist hit market which caused tensions to spark between US & Saudi Arabia with US President Donald Trump commenting that US government will impose sanctions if proof was found regarding involvement of Saudi Arabia in the murder of Saudi Journalist.

October wasn't just a tough month for equities, it was also a crushing month for crude oil.

"Mounting perception of a weakening in global oil demand due to increasing tariff issues between the USA and China, while extremely hard to measure, will be maintaining some negative influence in keeping would-be buyers sidelined", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. The U.S. surpassed Russian Federation in August to claim the title of world's top oil producer, with the largest year-on-year output increase in U.S. history.

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