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Oil Falls to Lowest in a Week After Surprise U.S. Crude Build

Jacquelyn Melinek
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Oil Falls to Lowest in a Week After Surprise U.S. Crude Build

(Bloomberg) -- Oil fell for a third day as a U.S. government report showed a bigger-than-expected build in domestic crude supplies and Chile canceled a summit where the U.S. and China were expected to sign a preliminary trade accord.

Futures in New York declined to the lowest in a week on Wednesday. The Energy Information Administration reported that American crude inventories rose by 5.7 million barrels last week, beating analyst forecasts, while supplies at the key Cushing, Oklahoma, storage hub rose for a fourth week. U.S. President Donald Trump’s plan to ink a trade deal with Chinese President Xi Jinping were thrown into question when Chile canceled next month’s APEC summit where the two leaders planned to meet.

“Chile canceling the summit put some uncertainty as to potentially when the U.S. China trade talks will be resolved,” said Brian Kessens, portfolio manager at Tortoise, a Kansas firm that oversees more than $21 billion in assets. “That’s going to weigh on the crude oil markets.”

West Texas Intermediate crude calendar spreads strengthened and WTI’s discount to Brent narrowed after TC Energy Corp. shut its Keystone oil pipeline Wednesday due to a spill in North Dakota.

A deteriorating global economy weakened by the trade war has driven a 17% slump in crude since late April. That’s put the onus on OPEC and its allies to extend output cuts, though there are questions over Russia’s willingness. The Saudis may need to consider deeper curbs with other Gulf countries if Russia abstains, Citigroup Inc. said.

WTI for December delivery slipped 48 cents to settle at $55.06 a barrel on the New York Mercantile Exchange. The U.S. benchmark was trading in a bearish contango structure, which indicates oversupply.

Brent for December fell 98 cents to $60.61 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a premium of $5.55 to WTI.

The EIA reported that West Coast gasoline imports jumped to 191,000 barrels a day, the most since May, as cargoes were diverted from New York after prices spiked in California. More tankers may head that way after another spate of upsets sent spot prices jumping again.

“There’s going to continue to be a focus on imports and exports, and in relation to that what’s causing reduced activity is the fairly high tanker prices right now so there is less global crude oil shipping,” Kessens said.

The OPEC+ alliance is due to meet in December to discuss whether to extend or deepen production cuts that expire in March. Brazil’s President Jair Bolsonaro said the country received an informal request to join OPEC, following a conversation with Saudi Crown Prince Mohammed bin Salman, and that he would like to join.

To contact the reporter on this story: Jacquelyn Melinek in New York at jmelinek@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Joe Carroll

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