‘Produce as much as you can’ Saudi mode sinks oil

Oil in New York slid more than 5 percent in Tuesday’s session as Saudi Arabia pledged to meet any supply shortfalls and as a risk-off sentiment spread throughout global markets.

Saudi Energy Minister Khalid Al-Falih said OPEC and its allies are in “produce as much as you can mode” to meet demand and replace any looming shortages due to Iranian sanctions. In the U.S., the industry-funded American Petroleum Institute is said to have reported a 9.88 million barrel rise in crude inventories last week. That would be the largest build since February 2017 if Energy Information Administration data confirms it Wednesday.

A crude build will likely be due to “continued low exports plus we are in maintenance season,” said James Williams, president of London, Arkansas-based energy

researcher WTRG Economics. Reports that Saudi Arabia has the ability to ramp up production “is generally negative.”

Oil stocks were caught up in Tuesday’s broader equity sell-off. The S&P 500 Oil & Gas Exploration & Production Index plunged as much as 4.9 percent. The gauge has now declined almost 12 percent so far in October, heading for its worst monthly performance since December 2015.

“There are several reasons for the slide in crude oil, chief among them is it’s a risk-off day across all financial markets,” said Bob Yawger, director of the futures division at Mizuho Securities USA. “You’re seeing people flee the commodities and equities space to most likely put their money in safe haven.”

West Texas Intermediate for December delivery traded at $66.04 a barrel at 4:41 p.m. after ending the session at $66.43 a barrel on the New York Mercantile Exchange, slipping below its 200day moving average for the first time in a year.

Brent for December settlement fell $3.39, or 4.3 percent, to settle at $76.44 a barrel on the Londonbased ICE Futures Europe exchange. It earlier fell below its 50day moving average for the first time since August. The global benchmark crude traded at a premium of $10.01 to WTI.

The API report is also said to show gasoline and distillate supplies each dropped by more than 2 million barrels last week, while Cushing, Oklahoma crude supplies rose.

U.S. crude inventories probably rose 3.7 million barrels last week, according to a Bloomberg survey of analysts. Meanwhile, supplies at Cushing likely increased 1.5 million barrels last week, according to a forecast compiled by Bloomberg.