Oil falls after US inventories deepen supply concerns

Oil prices fell Wednesday as a key US inventory report showed stockpiles rising more than expected, adding to a bearish backdrop amid a global glut of crude. China’s crude output rose 2.7% from a year earlier to 17.74 million tons while natural gas production climbed 1.1% to 9.6 billion cubic meters, according to the NBS data.

Investors are also keeping an eye on the outcome of a technical meeting of oil experts from the Organization of Petroleum Exporting Countries and non-Opec countries tomorrow, as well as a European Central Bank meeting and manufacturing data from China later this week. Mercuria chief executive Marco Dunand said the oil market could return to balance, even showing a deficit in 2016, as non-OPEC producers limit supply.

Crude oil for delivery in December on the New York Mercantile Exchange fell to an intraday low of $44.88 a barrel, the weakest level since October 2, before trading at $44.98 during US morning hours, down $1.31, or 2.8%.

OPEC is out for blood, and under no circumstances will it cut production, said Aslam. Is the price decline simply a reaction to elevated supply due to the growth of fracking or has worldwide oil demand fallen as a result slowing global growth?

Moody’s said that USA oil production only recently began to wane following months of declining oil rig counts. Analysts had expected a 3.9 million barrels increase.

“It suggests again the world is awash with oil”, Barratt said. The increase was more than double market expectations for a gain of 3.75 million barrels, according to analysts polled by Bloomberg News.

A US group, Producers for American Crude Oil Exports, said in an emailed statement that if USA policy on oil exports remains unchanged, overseas allies could turn to traditional adversaries for oil.

Inventories expanded in the world’s biggest oil consumer by 8.03 MMbbl last week, the Energy Information Administration said.

US crude CLc1 was down $1 at $45.29 a barrel by 11:56 a.m. EDT.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for December delivery shed 95 cents, or 1.94%, to trade at $47.76 a barrel.

The chart below compares changes in crude oil inventory levels this year versus the average changes over the last ten years and since 1983.