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Last Updated : Oct 17, 2019 10:12 PM IST | Source: Reuters

Oil falls, fanned by inventory rise and global demand worries

US crude inventories soared by 9.3 million barrels in the week to October 11, the US Energy Information Administration said, far surpassing estimates for a build of 2.8 million barrels last week.

Oil prices fell on October 17 after a larger-than-expected rise in US crude stockpiles and a series of weak economic figures, although a drop in fuel inventories helped offset the decline.

Global benchmark Brent crude lost 66 cents a barrel to trade at $58.75, a 1.1% drop, at 11:35 a.m. ET (1535 GMT). US WTI crude was down 41 cents at $52.95.

US crude inventories soared by 9.3 million barrels in the week to October 11, the US Energy Information Administration said, far surpassing estimates for a build of 2.8 million barrels last week.

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The rise was the result of a reduction in refining output for the week to its lowest capacity use nationwide since Hurricane Harvey in September 2017. Refining capacity use fell to 83.1% as refiners shut in capacity across the country.

Greater-than-anticipated fall in gasoline and diesel inventories offset the rise in crude stocks. Overall imports have fallen, in part due to sanctions imposed on Chinese shipping firm COSCO that have raised the freight costs.

"Inventories have built by a whopping 9.3 million barrels, led by the refinery utilization rate dropping to its lowest since Hurricane Harvey in September 2017," said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky.

"One saving grace for the bulls is that the drop to such a lowly level of refining activity has helped to encourage solid draws to both gasoline and distillate inventories," he said.

The United States imposed sanctions on COSCO Shipping Tanker (Dalian) Co and subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co for allegedly carrying Iranian oil.

Adding to concerns about the global economy, and therefore energy demand, US retail sales fell for the first time in seven months, while housing starts and industrial output dropped as well. Earlier data showed a moderation in job growth and services sector activity.

"If we see more indications of slowing demand, I think the market is going to continue to sink lower," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

Brexit developments helped limit oil's decline. Prime Minister Boris Johnson said Britain and the European Union had agreed a new deal for Britain to leave the block. Johnson urged lawmakers to approve it at the weekend.

Analysts have said any agreement that avoids a no-deal Brexit should boost economic growth and oil demand.

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First Published on Oct 17, 2019 10:10 pm
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