US crude prices fall more than 4% as inventories rise amid concerns about demand

US crude prices fall more than 4% as inventories rise amid concerns about demand

An aerial view of a crude oil storage facility on May 4, 2020 in Cushing, Oklahoma.

Johannes Eisele | AFP | Getty Images

US crude prices fell more than 4% on Thursday as inventories rose while industrial production fell.

The December West Texas Intermediate contract fell $3.37, or 4.40%, to $73.29 a barrel, while the January Brent contract fell $3.27, or 4.03%, to $77.91 a barrel. US crude and global crude were trading at their lowest levels since early July.

US crude inventories rose by 3.6 million barrels last week while production held steady at a record 13.2 million barrels per day, according to data released by the Energy Information Agency on Wednesday.

U.S. industrial production fell 0.6% in October, as a United Auto Workers strike weighed on auto production, according to data released by the Federal Reserve on Thursday.

Phil Flynn, an oil expert at Price Futures Group, said that the slowdown in industrial production and increased supply play a role in the demand slowdown theory. He said prices are now having difficulty finding support because bears are controlling the market.

In China, crude oil refining production slowed 2.8% in October to the equivalent of 15.1 million barrels per day from a record high in September, according to data from the National Bureau of Statistics, indicating slowing demand in the world’s second-largest economy.

The Organization of the Petroleum Exporting Countries (OPEC) on Monday blamed speculators for the recent decline in prices, dismissing negative sentiment as overdone.

OPEC said China’s crude oil imports remained healthy, rising by 11.4 million barrels per day in October. The organization also noted the strong US economic growth in the third quarter, and noted that the International Monetary Fund expects the Chinese economy to grow by 5.4% this year.

The organization said in its monthly report: “Despite the healthy and supportive market fundamentals mentioned above, oil prices have trended lower in recent weeks, driven mainly by speculators in the financial markets.”

Flynn said hedge funds are very short on oil futures right now and are dragging the market down. “The market right now is more of a money game than a fundamentals game,” he said.

Flynn said OPEC’s reaction at its meeting scheduled for November 26 is key. He added: “OPEC still believes that speculators are driving the market, so it will be interesting to see if they can engineer something to stop the free fall.”

    (tags for translation) Oil and Gas 

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