Oil prices fall on U.S. crude stocks build; fears over China demand

Andrew Cummings
August 30, 2016

Oil prices turned sharply lower Tuesday morning, but reversed momentum within minutes of media reports of Iranian support for a meeting of ministers next month in Algeria.

"I can not continue to stress that at this time of year we are supposed to be getting draws", Tariq Zahir, oil trader at Tyche Capital Advisors in NY, said, referring to the summer inventory drawdowns expected amid peak demand for motor fuels.

Oil fell in Asia Wednesday on oversupply fears, after data showed an increase in U.S. crude stocks, and as traders took advantage of a recent rally to book profits.

The report also showed that gasoline inventories rose by 36,000 barrels, disappointing expectations for a 1.1-million-barrel decline.

Data released by the American Petroleum Institute (API) highlighted a rise in USA crude stocks by 4.5 million barrels in the week ending 19 August.

Dozens of plants that will switch off for regular autumn maintenance will help slow the downward spiral in margins (the profit from refining crude into oil products) that have fallen to barely break even in 2016 from highs of around $11 a barrel a year earlier, analysts said.

Prices may be influenced later in the morning Wednesday after the U.S. Energy Information Administration publishes weekly data on production and inventory levels.

Refinery crude runs fell by 186,000 barrels per day, EIA data showed.

Brent crude futures were down 30 cents, or 0.6 percent, at $49.66 a barrel by 9:50 a.m. EDT (1350 GMT).

For distillate inventories including diesel, the EIA reported an increase of 122,000 barrels.

Unplanned outages in the U.S. Gulf Coast, a major export hub, including at ExxonMobil's 502,500 bpd Baton Rouge refinery, are further helping reduce the glut.

Iraq's Prime Minister Haider al-Abadi on Tuesday said the country has not yet reached its full oil market share, suggesting his government is not willing to restrain crude output.

He said he could see prices drifting closer to $45 a barrel over the next few days.

"And when Iraq and Saudi Arabia are producing at record levels, it is hard to see Iran being happy to produce well below their potential", he added. The fact remains that the global crude market is out of equilibrium by as much as 500,000 barrels per day, by some accounts. Off-topic, inappropriate or insulting comments will be removed.

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