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Oil down 2 per cent as U.S. crude build offsets gasoline draw

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by August 10, 2016 General

Oil prices fell 2 per cent on Wednesday after the second-biggest weekly draw
in U.S. gasoline this summer was countered by an unseasonal growth in crude
stockpiles.

Data showing Saudi Arabia pumping oil at record high volumes in July added to
worries about a global crude glut.

U.S. crude inventories gained 1.1 million barrels in the week ended Aug. 5,
the U.S. Energy Information Administration (EIA) reported, in a third straight
week of builds that surprised the market. Analysts polled by Reuters had
expected a 1.0 million-barrel crude draw instead.

The EIA also reported that U.S. gasoline stocks fell 2.8 million barrels last
week in the second-biggest weekly draw for gasoline since mid-April. The draw,
coming despite U.S. East Coast refinery runs hitting 2011 lows, exceeded
expectations for a gasoline stockpile drop of only 1.1 million barrels.

U.S. West Texas Intermediate (WTI) crude futures were down 88 cents, or 2 per
cent, at $41.89 per barrel by 12:48 p.m. EDT (1627 GMT). Last week, WTI fell
below $40 support for the first time since April.

Brent crude futures slid by 80 cents, or 1.8 per cent, to $44.18 per
barrel.

“We do feel that any further strength in the spot price will be met with
selling,” said Tariq Zahir, trader in crude oil spreads at Tyche Capital
Advisors in New York. “At this time of year, we should be drawing down in crude
inventories, and we are still building.”

U.S. gasoline futures fell 3 per cent, after initially gaining 1 per cent on
the gasoline draw data.

WTI had its sharpest monthly fall in a year in July, dropping 14 per cent,
after runaway gasoline demand for the summer still fell short of refiner
production. Storage tanks worldwide are nearly full with oil products while
refiner profits in Singapore have hit two-year lows.

The EIA added to the bearish supply-demand picture on Tuesday with a forecast
that showed it had scaled back estimates for U.S. crude oil output declines in
2016.

The outlook for oil also took a hit on Wednesday after No. 1 crude exporter
Saudi Arabia told the Organization of the Petroleum Exporting Countries (OPEC)
that the kingdom’s output reached a record high of 10.67 million barrels-per-day
(bpd) in July.Some remained positive on oil prices though, citing Venezuela’s
renewed efforts to get OPEC to cooperate with other oil producers on the market
after a failed effort in April.

“The mere suggestion of OPEC working in the background on a price support
initiative should be enough to hold the market in the $43-$45 levels in the near
term,” said Salvatore Recco, who helps oversee about $2-billion (£1.53 billion)
of client money, including in oil, at Gravity Investments in Denver.



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