US crude slumps below US$70 a barrel after large stock build

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Oil prices extended gains into a fourth session on Wednesday, buoyed as industry data showed a surprise decline in U.S. crude inventories and as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries.

Brent rose 64 cents per barrel to $81.42, while West Texas Intermediate rose 14 cents to settle at $71.92.

As oil prices hit $80 per barrel in recent months and with global oil inventories shrinking fast, Saudi Arabia and Russian Federation agreed to ease restrictions although they never said the exact levels they would target.

Overall, analysts forecast that US crude stockpiles rose last week for the fourth straight week, by about 2.2 million barrels, according to a Reuters poll ahead of weekly inventory reports.

Whether it's the need he's created for replacement supplies from Iran, or other actions by the US president, Trump's policies are now having a direct impact on where oil is flowing, said Eugene Lindell, an analyst at JBC Energy in Vienna.

Recent headlines reflect conventional thinking: "U.S. -Saudi Tensions Pushing Stocks Lower" and "Oil Prices Waver On U.S. -Saudi Tensions".

Tensions have flared between the US and Saudi Arabia over the disappearance of Jamal Khashoggi, a journalist with the Washington Post who was critical of the Middle East nation.

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Earlier in the day, Reuters reported that Mohammed Barkindo, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said that India was projected to see the largest additional oil demand (3.7 percent per annum) and the fastest growth in the period to 2040.

He said he had told the Indians "consistently that on November 4 the sanctions will be enforced and that we will consider waivers where appropriate". "The Kingdom also affirms that if it receives any action, it will respond with greater action, and that the Kingdom's economy has an influential and vital role in the global economy and that the Kingdom's economy is affected only by the impact of the global economy", Riyadh wrote, a thinly-veiled threat to use its outsized role in global oil production in retaliation to any attacks, sanctions, pressure, or other attempts to punish it for the killing of Khashoggi.

A claim by the United States that it aims to reduce Iran's oil exports to zero is a "political bluff", the head of the state-run National Iranian Oil Company was quoted as saying.

"So far the oil market is withstanding the verbal war and though prices are slightly higher. they are a good $5 below the peak last week", said City Index analyst Fiona Cincotta.

India is the world's third biggest oil consumer and importer.

Flows from Iran could drop by 2 million barrels a day, to below 1 million barrels day in November and possibly December, Energy Aspects Ltd. said in a report dated October 1. "The majority of oil demand comes from sectors like heavy vehicles and commercial vehicles, and this demand will remain for a long time to come", he said.

"The weakening crude spreads nearly globally in the face of Iran sanctions is likely generating some concern on how strong market really is and if it's ready to rally more", said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.

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