The Wall Street Journal pointed out that crude oil inventories had surged the most in 34 years extending a sell off. Records began to be kept only in 1982 so it is the largest surge since records have been kept.
On Wednesday oil prices fell three percent. The U.S. Energy Information Administration (EIA) reported that crude inventories rose 14.4 million barrels for the week ending October 28. Analysts had estimated an increase of only one million barrels. The American Petroleum Institute on Tuesday had reported a build of 9.3 million barrels. Energy analyst, James L. Williams. said: “This is very, very, very bearish. Nothing else in the report matters.”
West Texas Intermediate (WTI) crude ended the day at U.S. $45.34 a barrel, down $1.33 from the open. It broke through the $45 support level during the day reaching a low of U.S. $44.96. Brent fell $1.28 a barrel to U.S. $46.86 but not before reaching its lowest level since Sept. 28 at $46.46 a barrel. Last month, WTI hit a high for 15 months at $51.93, while Brent hit a high for the year of $53.73 a barrel.
Tariq Zahir of Tyche Capital Advisors in New York said: “There are lots of longs coming out of the market, liquidating. I wouldn’t be surprised if by the end of the week or beginning of next week, we’ll get to $42 or $41 a barrel, as very few believe OPEC will make cuts that matter.” OPEC production was likely to have reached a record high in October of 33.8 million barrels per day. The group is planning to meet on November 30 to finalize cuts. However, already two members, Nigeria and Libya have indicated they are more interested in increasing production than cutting it.
Increased imports of oil added to the buildup at around nine million barrels per day. This is the highest it has been since September of 2012. However, Scott Shelton a broker and commodities specialist said: “I don’t think that imports will stay this high and (refinery) runs will be increasing from here. This tells me that while this is an ugly report, it’s the worst we are going to see for the rest of the year.”
Stock prices dropped along with oil. U.S. and European stocks were at a 4-month low. Investors shunned risks. Some placed their money in what they regarded as safe havens such as gold. This is the second day stocks have been dropping partly on increased jitters about the result of the US elections as questions are raised again about Clinton emails. U.S. treasury bond yields were their lowest in a week. The 47 country “”All World” index fell 0.42 percent.
Andre Bakhos of Janly Capital said: “As the polls change, the market is growing more nervous and is beginning to price in a Trump presidency. While Clinton represents a status quo, there is little clarity on what kind of impact Trump’s policies will have on trade and foreign policy.”
The Dow Jones Industrial average fell 27.09 points, or 0.15 percent to 18,010. The S & P lost 7 points to 2,104.72 or .33 percent. The Nasdaq shed 15.77 points or 0.31 percent at 5,137.81. The FTSEurofirst 300 index was down 1.1 percent. The US dollar also lost ground the index falling 0.5 percent to 97.226 its lowest since Oct. 11. Gold was up with spot gold prices up 1.22 percent at $1,303.56. The TSX in Toronto Canada showed a huge drop of 183.70 to 14,594.72
