Oil dips on US supply concern as storm threat eases

Oil industry news
Oil industry news

Oil fell near $69 a barrel on concern over higher inventories at a key storage hub in the U.S. and as the threat posed by a storm to Gulf of Mexico assets eased.

Futures in New York slipped as much as 0.8 percent, a day after erasing most of their gains to close little changed. Government data due Wednesday is forecast to show stockpiles at Cushing in Oklahoma increased a fourth straight week. Meanwhile, the impact of Tropical Storm Gordon on U.S. output has been smaller than expected. A rally in the greenback has also decreased the appeal of dollar-based commodities.

The prospect of higher Cushing inventories, a less-destructive storm and wider financial market turmoil is limiting gains in oil after prices rose last week on concern that U.S. sanctions would curb Iran’s exports. While the OPEC member has pledged to keep shipping crude despite the American measures that go into effect in early November, its sales are shrinking. The Organization of Petroleum Exporting Countries, meanwhile, is pumping more.

“It’s becoming clear that there won’t be a huge impact from the tropical storm as it is taking a more easterly path than expected,” said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. While there are several short-term bearish factors including expectations that Cushing inventories have fallen, “prices are unlikely to keep declining to below $65 or $60 levels as a drop in Iranian supply is becoming apparent,” he said.

West Texas Intermediate for October delivery declined as much as 57 cents to $69.30 a barrel on the New York Mercantile Exchange and traded at $69.37 at 12:02 p.m. in Tokyo. The contract rose 7 cents to $69.87 on Tuesday from Friday’s close. Monday’s trades were booked Tuesday because of the U.S. Labor Day holiday. Total volume traded was about 47 percent below the 100-day average.

Brent for November settlement dropped as much as 35 cents, or 0.5 percent, to $77.82 a barrel on the ICE Futures Europe exchange. Prices on Tuesday edged up 2 cents to $78.17. The global benchmark crude traded at a $8.81 premium to WTI for the same month, near the widest since June 20.

December futures in Shanghai slipped 0.3 percent to 522.2 yuan a barrel; the contract climbed 0.5 percent on Tuesday.

Crude inventories at the Cushing storage hub are forecast to have increased 600,000 barrels in the week ended Aug. 31, according to the forecast compiled by Bloomberg; nationwide stockpiles probably fell 2.75 million barrels last week, according to a Bloomberg survey. Storm Gordon may still reach hurricane strength by the time it slams into the U.S. Gulf Coast; about 9.23 percent, or 156,900 barrels a day, of oil production has been shut in across the Gulf, according to the U.S. Bureau of Safety and Environmental Enforcement. The dollar has been propelled by the U.S. Federal Reserve’s withdrawal of liquidity, which has raised funding costs globally. It strengthened on Tuesday after data showed American manufacturing jumped to a 14-year high. As the greenback climbed, so have investor fears over risks in emerging markets: South Africa has slumped into a recession, inflation is surging in Turkey, Argentina is grappling with fiscal woes, the Indian and Indonesian currencies are weakening. The United Nations said Tuesday rival factions that have been fighting in Libya’s capital Tripoli agreed to a ceasefire. The nation was the biggest contributor to a rise in output across OPEC, pumping 970,000 barrels a day last month compared to 660,000 barrels in July.