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Oil pops as US sanctions on Saudis outweigh rising stockpile

Bloomberg logoBloomberg 11/15/2018 Jessica Summers

Oil clung to its rebound as tension over U.S. sanctions against Saudi Arabia overshadowed a jump in American crude stockpiles.

Futures in New York rose as much as 1.8 percent after the Trump administration issued financial penalties against 17 top Saudi officials over the death of journalist Jamal Khashoggi, hours after the kingdom charged 11 people for the murder. The geopolitical tension outweighed a government report showing the biggest weekly crude-storage increase since February 2017.

“These massive crude oil builds that we’ve seen week after week in the U.S., sucked all of the geopolitical risk out of the crude oil price,” said Rob Thummel, managing director at Tortoise, which manages $16 billion in energy-related assets. The announcement on sanctions “puts some risk back into the market.”

Geopolitical risk helps oil rally© Bloomberg Geopolitical risk helps oil rally

Among the sanctioned officials was Saud al-Qahtani, a former senior adviser to Crown Prince Mohammed bin Salman. The imposition of limited access to the financial system and asset freezes came shortly after the U.S. announced plans to end air refueling flights for the Saudi-led coalition fighting Houthi rebels in Yemen.

Also boosting the price of crude oil is speculation of renewed OPEC supply cuts. The cartel and its partners are considering reducing output by more than the 1 million barrels a day Saudi Arabia proposed earlier this week, people familiar with the matter said. Yet, Russian President Vladimir Putin said his country is happy with current prices.

West Texas Intermediate for December delivery advanced 87 cents to $57.12 a barrel at 11:31 a.m. on the New York Mercantile Exchange. Total volume traded Thursday was about 24 percent above the 100-day average.

Brent for January settlement climbed $1.01 to $67.13 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $9.88 premium to WTI for the same month.

Russia aims to continue cooperation with OPEC to stabilize the oil market, with existing efforts having shown “positive results,” Putin said. He also said he hopes to make progress on restoring relations with the U.S. when he meets Trump at the end of this month on the sidelines of the Group of 20 summit in Argentina.

Meanwhile, in the U.S., crude inventories rose by 10.27 million barrels last week, while gasoline and distillate supplies declined, according to a report from the Energy Information Administration on Thursday. U.S. total petroleum supplied jumped to a record.

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