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Oil dips as US stockpiles expected to rise again
[NEW YORK] Oil prices fell on Tuesday with the market expecting another rise in US stockpiles as mild weather limited demand and sent natural gas prices to three-year lows.
Also putting downward pressure were comments from Saudi Arabia's influential oil minister implying the country remains reticent to shore up the market, and a provision in a tentative US budget deal to sell off 58 million barrels from the US Strategic Petroleum Reserve over six years.
US benchmark West Texas Intermediate (WTI) for delivery in December dipped 78 cents to US$43.20 per barrel compared with Monday's close.
Brent North Sea crude for December delivery shed 73 cents at US$46.81 per barrel in London trade.
The WTI price fell below US$42.60 for a moment during trade, the lowest since August.
"The support at US$43.50 is broken now, it opens the door to a test at US$40," said Bill Baruch at iitrader.com.
Baruch noted, too, that China has been holding off import buying "because they believe prices will go lower," keeping the market weak.
Analysts consulted by Bloomberg predicted another increase in US commercial crude stockpiles in industry and official reports to come later on Tuesday and on Wednesday, respectively.
The mild autumn weather over much of the country, coupled with generous production of both oil and natural gas, has added to the oversupply, with stockpiles resting near all-time highs.
A proposed budget deal reached in Congress late Monday includes a provision to raise several billion dollars by selling off part of the country's strategic crude reserve. While the amount was relatively small, stretched over six years, it still adds to supply forecasts.
Saudi's oil minister Ali al-Naimi told reporters in Riyadh that the country is mulling cuts to domestic fuel subsidies that keep gasoline prices ultra-cheap and encourage higher domestic consumption.
But he also told reporters, when asked whether the country would take action to strengthen global prices, that prices were just "a function of supply and demand."
As Opec's largest producer and the only one with significant spare capacity, Saudi Arabia has traditionally acted to stabilise the market by adjusting output.