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Oil declines as bearish US crude inventory report looms

Bloomberg logoBloomberg 9/19/2017 Jessica Summers

Oil closed lower for the first time in more than a week as traders awaited storage data that may show the longest expansion of U.S. crude inventories in almost half a year.

Futures dropped 0.9 percent in New York, failing to close outside of the narrow 61-cent settlement range of the past five sessions. A government report on Wednesday is expected to register a 3.9 million-barrel increase in U.S. oil held in storage, according to a Bloomberg survey. The bearish supply outlook erased earlier gains driven by Iraqi Oil Minister Jabbar al-Luaibi’s support for more extensive efforts by OPEC and allied oil producers to shave a global supply glut.

“We are going to tread water ahead of the inventory report. There is a sense that we may have a bit of an upside surprise in the crude inventory number,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “We continue to have the OPEC folks trotting the globe and continuing to talk up either longer cuts, deeper cuts. The market is rewarding that to a degree.”

While the U.S. benchmark has tipped above $50 this month, prices haven’t sustained a close above that key level since the end of July as increasing U.S. shale output hindered efforts by OPEC, Russia and other major sources of supply to whittle a stubborn glut. The Energy Information Administration sees shale-oil production reaching a record high next month.

West Texas Intermediate for October delivery, which expires Wednesday, slipped 43 cents to settle at $49.48 a barrel on the New York Mercantile Exchange. Total volume traded was about 3 percent below the 100-day average. WTI settled below its 200-day moving average after moving above the level earlier in the session.

“It’s no accident” that prices rose slightly above the 200-day moving average before reverting lower, Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “We’re going to hover around there for a while.”

Brent for November settlement fell 34 cents to end the session at $55.14 a barrel on the London-based ICE Futures Europe exchange, the lowest level in a week. The global benchmark traded at a premium of $5.24 to November WTI.

At least 13 fuel-making plants from Louisiana to Montana, including the largest U.S. refinery operated by Motiva Enterprises LLC in Texas, are postponing autumn maintenance for weeks or months, according to company statements and people familiar with the situations. Some plants are churning out more fuel to take advantage of strong profit margins, while others are understaffed because workers were dispatched to help Gulf Coast facilities restart after Hurricane Harvey.

The Energy Information Administration is scheduled to release its weekly tallies of oil, gasoline and other petroleum products on Wednesday. The industry-funded American Petroleum Institute will release its inventory data on Tuesday.

“I expect there will certainly be a build given the amount of refinery capacity that came offline,” Adam Wise, who oversees an $8 billion energy portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. For oil to stick above $50, “you need trader sentiment to be more constructive longer-term.”

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