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Oil drops to end a weak October



US. Inventories: On Wednesday, the US Energy Information Administration reported that crude oil inventories rose 3.2 million barrels in the week ending October 26, the sixth consecutive week of growth. Prices came under pressure after the American Petroleum Institute, an industrial group, had reported its own estimates of a 5.7 million barrel build. Analysts and traders surveyed by the Wall Street Journal forecast an average increase of 2.9 million barrels. Meanwhile, gasoline reserves fell by 3.2 million barrels and distillate inventories by 4.1 million barrels.

Global Growth: Concerns over the slowdown in global economic growth have weighed on stock prices in recent weeks as stock markets have been volatile. Crude oil prices have fallen by around 1

2% since the four-year high reached in early October. West Texas Intermediate fell to its lowest level since mid-August on Tuesday. A major focus continues to be the escalating US-China trade disputes as President Trump threatened Beijing with new tariffs this week. "Such threats are not a good sign of the health of the global economy and thus the outlook for oil demand," said Stephen Brennock, brokerage analyst PVM Oil Associates Ltd.

. The US Energy Information Agency reported that crude oil inventories rose 3.2 million barrels a week, ending on October 26.

The US Energy Information Administration reported that crude oil inventories increased by 3.2 million barrels in the week ending October 26.


Photo:

Yegor Aleyev / TASS / Zuma Press

US. Dollar: A stronger dollar also put pressure on oil prices. The WSJ Dollar Index rose 0.1% to 90.91 and has risen 5.7% since the beginning of the year. US dollar-denominated commodities such as crude oil are becoming more expensive to foreign investors as the US currency rises.

INSIGHT

Equities: Analysts continue to link the development of oil and stocks, both of which are vulnerable to cracks in global growth expectations. On Wednesday, the Dow Jones Industrial Average rose 1% and the S & P 500 rose 2.1%. "I think the market will be very sensitive to equities," said Kyle Cooper, a consultant at ION Energy. "If stocks do not bottom out, you could certainly see" oil prices go down.

Speculative Investors: "We've come to the end of October today and the exchange has witnessed a massive erosion of speculative bullishness. Brent's prices in the first week of this month were $ 86 a barrel analysts at consultancy JBC Energy said in a daily statement on Wednesday: "Net long crude oil positions among money managers have shrunk by 260,000 lots over the past four weeks," they added.

OPEC: All eyes are on Iran, an important member of the Organization of Petroleum Exporting Countries, and US sanctions on the oil industry in the Islamic Republic, with Iran's crude oil exports already plummeting by around 800,000 barrels per day since President Trump joined the US has withdrawn from the 2015 International Agreement to Halt the Iranian Nuclear Program and introduction of sanctions. Oil market participants are watching to see if Saudi Arabia – the factual leader of OPEC – and its production allies, including Russia, are able to fill the backlog of Iran's supply.

AHEAD

  • Royal Dutch Shell PLC publishes Thursday's quarterly earnings.

Please contact Christopher Alessi at christopher.alessi@wsj.com and Stephanie Yang at stephanie.yang@wsj.com


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