Oil Sinks to 10-Week Low After Surprise U.S. Stockpile Build

(Bloomberg) -- Oil plunged after U.S. stockpiles swelled by the most since March 2017 as investor concerns increased that the U.S.-China trade war and the Turkish crisis will undercut demand.

Futures in New York fell 3 percent on Wednesday to the lowest level since June 6. American crude inventories increased by 6.81 million barrels last week, the Energy Information Administration reported, contrary to analyst estimates for a 2.5 million-barrel decline in a Bloomberg survey.

"The headline number along with the negativity in the overall market was taken as a very bearish number," said Phil Flynn, senior market analyst for Price Futures Group Inc. "We're reacting to the shock value of the big build."

West Texas Intermediate crude for September delivery fell $2.03 on Wednesday to settle at $65.01 a barrel on the New York Mercantile Exchange.

Brent for October settlement fell $1.70 to $70.76 a barrel on the London-based ICE Futures Europe exchange, and traded at a $6.30 premium to WTI for the same month.

Meanwhile, copper fell into a bear market and other metals tumbled on concerns that the Turkish crisis will spill over into emerging markets, unnerving investors already rattled by a trade dispute between the U.S. and China.

"We're seeing a bit of ratcheting up of worries about demand growth and that is underpinned by the the tariff issues with China and whether we might be seeing signs of demand growth in Asia starting to come off a little," said Gene McGillian, market research manager for Tradition Energy. He said investors are wondering whether the crisis in Turkey could be a contagion issue.

Both nationwide stockpiles and supplies in the key storage hub of Cushing, Oklahoma, increased last week. But, the story looked different to refiners. The EIA report showed American refineries operated at 98.1 percent of capacity last week, the highest level since 1999.

"Yes, it was a big build, but it's kind of overshadowing the fact that we had a huge refining numbers," Flynn said. "They're knocking the socks off it."

Other oil-market news:

• Gasoline futures fell 1.8 percent in New York to settle at $1.9974 a gallon.
• With fewer than three months to go until a deadline to cut purchases of Iran oil, China signals it will resist U.S. sanction measures, while Europe appears to be cutting back Iranian crude imports.
• Libya, holder of Africa's biggest crude reserves, is said to be pumping more than 1 million barrels a day, after its largest field restored normal operations. And, output at Arabian Gulf Oil Co., known as Agoco in Libya, may reach 300,000 barrels a day next week.
• Diamondback Energy Inc. agreed to buy Energen Corp. in an $8.4 billion all-stock deal, the latest in more than $30 billion in transactions this year center in the Permian amid a booming U.S. shale industry.

--With assistance from Sharon Cho and Grant Smith.

To contact the reporter on this story: Erin Douglas in New York at edouglas16@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, David Marino, Debarati Roy

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