Oil prices fell on Thursday after data from the US Energy Information Administration showed a rise in gasoline and distillate inventories as well as a slight increase in stockpiles at the Cushing, Oklahoma, delivery hub for US crude futures.  Seven Generations photo.

Oil prices respond to Cushing build

On Thursday, oil prices fell after the US Energy Information Administration released data showing increased gasoline and distillate inventories as well as a slight build at the Cushing, Oklahoma, delivery hub.

By 4:01 p.m., EDT, benchmark Brent crude futures were down 59 cents to $76.68/barrel and US West Texas Intermediate futures fell 77 cents to $67.95/barrel.  The Canadian Crude Index dropped $1.87 to $41.65.

According to the EIA, inventories at Cushing rose by 549,000 barrels last week.

“The slow climb back of crude oil levels at Cushing is somewhat bearish, and the absence of Chinese buyers of U.S. crude oil is depressing export volumes,” John Kilduff, a partner at Again Capital Management told Reuters.

“Domestic production is not growing at the pace it was earlier in the year, either.”

Earlier in the session, both US WTI and Brent traded higher on a weaker US dollar and data showing strong US fuel demand.  Meanwhile, emerging market stocks, bonds and currencies have dropped recently in response to financial crises in Turkey, Venezuela and South Africa.

“In the last week we’ve seen the focus shift again from supply back to demand and the continued calamity in emerging market stocks, bonds and currencies is weighing on the medium and longer-term demand outlook,” Saxo Bank senior manager Ole Hansen told Reuters.

“We did see quite a lot of momentum last week and then oil was shot down in flames after its failed attempt to break above $80 … now we have the extra dimension of a spike in oil prices that can only increase the pain (for consumers) and the risk of a slowdown in demand.”

Prices fell even as the market readies itself for the Iran crude export sanctions which will reduce the world’s supply of crude by at least 1 million barrels per day (b/d) beginning in early November.

The Trump administration is re-imposing the sanctions against Tehran after Washington abandoned the 2015 sanction relief deal signed by former President Barack Obama.  Since Trump announced he was pulling the US out of the deal last May, oil prices have risen 3 per cent.

“The million-dollar question is how much Iranian oil will be lost after Nov. 4 when the second round of sanctions kicks in.” PVM Oil Associates strategist Tamas Varga told Reuters.

“If it is around 1 million b/d, or more, as expected, the fragile supply/demand balance will be upset and oil prices will stay supported.”

Plummeting production in Venezuela is another concern.  Currently, Venezuela is producing a little over 1 million b/d, about half of its production in 2016.

On Wednesday, OPEC forecast global oil demand will be over 100 million b/d for the first time ever, this year.