Oil prices fell for a third straight session to multi-week lows on Tuesday on the persistent global supply glut ahead of US data expected to show another increase in crude inventories. Crude futures felt pressure from analyst expectations that US crude inventories rose last week, a fifth consecutive build after gaining 22 million barrels in a four-week span.
At 476.6 million barrels, US crude stocks on October 16 were nearly 100 million barrels above the year-ago period, according to Energy Information Administration (EIA) data. Brent December futures fell 73 cents to settle at $46.81 a barrel. The settlement and the $46.41 session low were the lowest since September 15. US December crude fell 78 cents to settle at $43.20, lowest settlement since August 27. Tuesday's intraday low of $42.58 was the weakest since August 28.
Front-month November US RBOB gasoline and ultra-low sulfur diesel (ULSD) seesawed in volatile trading on the day options expired. The November contracts expire on Friday. "It's still the supply glut weighing on crude and the products are going to be a bit volatile with options expiration," said Phil Flynn, analyst at Price Futures Group in Chicago.
While distillate inventories, which include diesel and jet fuel, were expected have fallen last week, storage utilisation for distillates in the United States and Europe is nearing historic highs, Goldman Sachs said on Monday. The latest US inventory snap shots from industry group American Petroleum Institute (API) are due later on Tuesday, with EIA data to follow on Wednesday.
US crude oil production cuts - from a peak of around 9.6 million barrels per day to around 9.1 million - and optimism over demand have failed to translate into higher prices, said Ric Spooner, chief market analyst at Sydney's CMC Markets. Investors awaited the outcomes of key policy talks this week, including a US Federal Reserve meeting that ends on Wednesday and China's fifth plenum, a meeting of the Communist Party's central committee, that began on Monday.
"China's appetite for foreign crude oil has been impressive this year, driven by an accelerated build-out of Strategic Petroleum Reserve storage facilities, and the granting of crude usage and import quotas for independent 'teapot' refineries," Citi said in a report. But about 4 million barrels purchased by a Chinese state trader for the reserve have been stranded in tankers off shore due to a lack of storage, according to trade sources.
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