Cushing Build Leads to Drop in Oil Prices
Oil prices on Monday plunged following the release of data pointing to a rise in U.S. crude delivery hub inventories in the recent week. The news increased worries that the disturbed emerging markets as well the trade tensions would adversely affect the fuel demand.
Fall In Oil Prices
Brent crude futures LCOc1 plunged by 0.3% or 20 cents and settled at $72.61 per barrel. The U.S. West Texas Intermediate (WTI) crude futures CLc1 dropped by 0.7% or 43 cents and settled at $67.20 per barrel.
Traders noted that prices dropped earlier in the trading session by over $1 per barrel after inventories at the Cushing, Oklahoma WTI delivery hub climbed by approximately 1.7 million barrels. The traders who cited data from Gensacape noted that the change happened in the week leading up to August 10.
Sources claim that Cushing’s crude inventories have not been doing so well, partly as a result of outage at an oil processing plant in Canada which led to a reduction of crude flow into the delivery hub.
The Canada processing facility has reportedly started increasing oil production and is also expected to recommence full production come September. John Kiilduff, partner at New York-based Again Capital Management, stated that Cushing might eventually begin to recover from the extremely low levels of inventories.
Increase in Contagion Risk
Analysts mentioned that the financial crisis of Turkey spread the contagion risk into all emerging economies, dragging down Russian rouble, Mexico and Argentina’s pesos and South Africa’s rand.
Not only were the economies affected, but the stocks of the emerging markets were also compromised by the crisis and led to a reduction in the outlook and growth of oil demand.
The crisis is reportedly escalating worries that a stronger trade war between China, the United States and European Union would cause a strain on business activities in the leading world economies.
Turkey is a considerably low consumer of oil as it accounts for a number less than a million barrels daily – which is approximately 1% of the global demand. Jim Ritterbusch, the president of Ritterbusch and Associates noted that concerns about contagion are propelling risk-off sentiment in the market.
Ritterbusch added that the energy issue is constantly being increased by daily news that may not particularly have a huge effect on the current oil demand or supply temporarily but could, however, have a dramatic effect on the oil balances subsequently.
In addition, a report by the Organization of Petroleum Exporting Countries projected a lower demand for its crude oil in 2019. Sources claimed that the organization’s rivals boosted their oil production while Saudi Arabia cut back on its supply to avoid oversupply return. OPEC’s monthly report stated that 32.05 million barrels of crude are needed per day globally from all its 15 members next year. The forecast decreased by 130,000 barrel per day from July forecast.
The U.S. Energy Information Administration stated that the US oil production from seven primary shale basins was expected to increase by 93,000 barrels per day in September to 7.52 million barrel.
OPEC’s report also expressed concerns over global trade tensions and how it had affected crude prices last month, even though it expected refined products to back the market.
The Report indicates that a stronger global economic development coupled with an increase in industrial activity ought to bring back demand for distillate fuels in subsequent months and lead to a further decline in diesel inventories.
Sources also reported that OPEC reached a consensus with a group of Non-Opec countries on June 22-23 to go back to 100% compliance with the cuts in oil outputs.
The cuts started in January last year following months of underproduction by some members, including Venezuela and some other member which made the adherence go lower than 160%. OPEC also stated in the report that the oil output in July increased to 32.32 million barrel per day.
Even though it is higher than the demand forecast for next year, it is only up by just 41,000 barrel per day from last month as the cut by Saudi offset increases somewhere else.
More in Global Markets
Don’t Refinance Your Home without Doing These Five Things
Thinking of giving your home a major renovation or take advantage of low mortgage interest rates? Some might tell you that...October 17, 2018
New York City Council Votes to Cap Ride-Hailing Vehicles
Majority Carries The Vote A majority of the New York City Council on Wednesday reportedly voted to put a limit on...October 17, 2018
How to Choose the Best Life Insurance Coverage For the Disabled
Securing Financial Protection A primary reason why people get life insurance is so that after the demise of a loved one,...October 17, 2018
Another Economic Crisis Could Be on the Horizon, But Where Will it Start?
The banking system has learned some hard lessons from the 2008 financial crisis which shook the global economy to its core....October 17, 2018
This Retirement Expense is Making Women Lose Their Sleep
The only time living too long can become a curse is when you run out of retirement savings. And it is...October 15, 2018
Google’s Newest Sister Company Ready to Take Over Cybersecurity Industry
In January, Alphabet, the company you probably think is ‘Google’, revealed a new cybersecurity company, Chronicle, from its X moonshot factory....October 15, 2018
Is it Possible to Reduce Tax Cuts On Your Retirement Funds?
Tax-deferred investing is one unclear area for most people that invest in retirement plans like IRAs, 403 (b) and 401(k). An...October 14, 2018
Here’s Why Some People Never Retire
Changing Trends In recent times, it has become commonplace for baby boomers to keep working even into their 80s. Different reasons...October 14, 2018
Amazon Steals Project Runway’s Award-winning Hosts Heidi Klum and Tim Gunn
Project Runway is about to lose its award-winning judging duo, Tim Gunn and Heidi Klum. And guess who’s poaching the show’s...October 14, 2018