Sunday 09, September 2018 by Bloomberg

Crude sinks as emerging-market tumult leads to risk-off mood

 

Crude plunged to a two-week low as emerging-market stocks tumbled to the edge of bear market territory.

Futures in New York slid 1.4 per cent on Thursday. Emerging-market stocks extended losses from a January peak to 20 per cent, the threshold of a bear market. Meanwhile, the Energy Information Administration reported rising fuel stockpiles across the U.S. at the same time as supplies at the nation’s largest crude distribution hub in Cushing, Oklahoma, also expanded last week.

“Bear market territory or not, there is some weakness there,” said Brian Kessens, who helps manage $16 billion in energy assets at Tortoise. Investors are focusing on “what that might mean in the future for global oil demand. It’s just a risk-off day.”

Aside from the emerging-market scare, traders are focused on U.S.-imposed sanctions on Iran. As the early-November deadline set by the U.S. on Iran’s exports nears, JXTG Holdings Inc., Japan’s biggest refiner, and domestic rival Idemitsu Kosan Co. are both said to have skipped purchases of Iranian supplies loading in October.

West Texas Intermediate for October delivery slid 95 cents to settle at $67.77 a barrel on the New York Mercantile Exchange. Total volume traded was about 9 per cent below the 100-day average.

Brent for November settlement fell 77 cents to end the session at $76.50 a barrel on the ICE Futures Europe exchange. The global benchmark crude traded at a $8.98 premium to WTI for the same month.

The EIA reported gasoline supplies rose 1.85 million barrels last week, while distillate fuel stocks increased by 3.12 million. Cushing stockpiles expanded by 549,000 barrels, overshadowing a decline in crude inventories of 4.3 million.

Reports of stockpile increases “to a great extent has created some negativity,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. There is concern “that there may be a bit of a demand decline.”

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