By Heesu Lee and Alex Longley
Futures in New York fell as much as 1.4% after dropping 1.5% Monday. Genscape Inc. said oil stored at the Cushing storage hub expanded last week, reviving concerns over sluggish demand and ample inventories before industry stockpile data due later. Meanwhile, Citigroup said Saudi Arabia may have to consider deeper oil cuts without Russia, after the latter said it was too soon to talk about deeper cuts. The dollar also moved higher, while European equity markets fell.
Crude is heading for its best month since June, nearing a technical barrier in its 200-day moving average. Still, it’s fallen around 16% since late April as the U.S.-China trade war weighs on demand and American production keeps rising. Optimism grew Tuesday that Washington and Beijing are getting closer to a deal, but it’s unclear if a partial agreement that doesn’t roll back existing tariffs will have much impact on oil demand.
“On a technical basis you’ve got the 200-day moving average in WTI which is being tested,” says Olivier Jakob, managing director at Petromatrix GmbH. “Otherwise there are expectations that we will see another big build in Cushing.”
West Texas Intermediate for December delivery fell 71 cents, or 1.3%, to $55.10 a barrel on the New York Mercantile Exchange as of 10:53 a.m. in London. Brent for December settlement declined 68 cents, or 1.1%, to $60.89 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.79 premium to WTI.
Crude inventories at Cushing, Oklahoma rose by 1.5 million barrels last week, according to data-provider Genscape. If confirmed by the official EIA figures due Wednesday, that would be a fourth straight week of gains at the U.S. storage hub.
The Organization of Petroleum Exporting Countries will need to announce a further 500,000 barrels a day of output reductions in 2020 at its December meeting to keep Brent prices from falling below $60 a barrel, Sanford C. Bernstein & Co. said in a note. That’s a result of surging supply from outside of the group and weaker global oil demand growth.
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