(Bloomberg) -- Oil is poised for the biggest weekly decline since May as the turmoil in U.S. equities spur investors to shun risk assets at a time when American crude inventories are rising.
Futures in New York were little changed, heading for a weekly drop of over 4 percent. The S&P 500 Index of equities is set for the worst week in more than six months on concerns over rising interest rates and the U.S.-China trade war. Everything from crude to zinc was hit by the sell-off, while gold -- a safe-haven -- surged the most in more than two years. Meanwhile, American crude stockpiles increased more than forecast, rising for a third week.
“For oil, it’s important to look at the fundamental side because the recent decline is due to the risk-off sentiment across markets,” Min Byungkyu, a Seoul-based global market strategist at Yuanta Securities Co., said by phone. “Uncertainties still remain over output disruptions in Iran, and a supply shortage is looming in the market, so once the negative sentiment eases, oil will recover before equities.”
Oil has retreated almost 7 percent after reaching a four-year high earlier this month. Still, with impending U.S. sanctions on Iran set to cut the OPEC producer’s oil exports, traders continue to worry about whether the Organization of Petroleum Exporting Countries will be able to offset potential production losses.
West Texas Intermediate for November delivery was at $71.31 a barrel on the New York Mercantile Exchange at 12:35 p.m. in Seoul, up 34 cents. The contract fell $2.20 to $70.97 on Thursday. Prices are down 4.1 percent for the week. Total volume traded was about 26 percent below the 100-day average.
Brent for December settlement added 44 cents to $80.70 a barrel on the London-based ICE Futures Europe exchange. The contract declined $2.83 to $80.26 on Thursday. Prices are down 4.1 percent for the week. The global benchmark crude traded at a $9.50 premium to WTI for the same month.
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As the biggest American stock sell-off in months soured sentiment across markets including raw materials, a measure of oil price volatility has surged to the highest level since July during the session on Thursday. The Bloomberg Commodity Index had its first back-to-back drop in three weeks on Thursday as oil and aluminum prices plunged, and is on course for the first weekly drop in four weeks.
For American crude stockpiles, the Energy Information Administration reported nationwide inventories rose 5.99 million barrels last week, more than the 2.8 million increase predicted in a Bloomberg survey. Inventories at the key storage hub in Cushing, Oklahoma, have gained for a third straight week, while stockpiles in the Strategic Petroleum Reserve fell by 1.31 million barrels, the EIA said.
