Oil prices fall as economic concerns counter tightening supplies

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Crude oil storage tanks are seen from above at the oil hub in Cushing, Oklahoma, March 24, 2016.

Light, sweet crude for October delivery dropped $1.78, or 2.5%, to $68.59 a barrel on the New York Mercantile Exchange, its worst day since August 15 after it closed at its highest level since July 20 a session earlier.

NYMEX WTI futures and options contract values for December 2018 delivery traded during the five-day period ending September 6, 2018, suggest a range of $56/Bbl to $85/Bbl with a 95% confidence level.

The increases extended a more than 2 percent climb in both crude benchmarks the previous session.

"Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed US crude inventories slumped 8.6 million barrels last week, versus analysts' forecasts of a 805,000-barrel decrease. US shale, while signs of a production slowdown have yet to really materialize in the production data from the EIA, is still running into a rough patch.

Regarding crude oil production, the EIA said on Tuesday it expected US output to rise by 840,000 barrels per day (bpd) between 2018 and 2019 to 11.5 million bpd, lower than a rise of 1.02 million bpd to 11.7 million that was previously forecast.

Crude and gasoline posted the biggest gains since late June as Hurricane Florence threatened U.S. East Coast fuel markets and sanctions began crimping Iranian oil exports.

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Washington has asked buyers of Iranian oil to cut imports to zero in the run up to early November to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

Russian energy minister Alexander Novak on Wednesday warned of the impact of us sanctions against Iran. The State Department earlier this year called on buyers to stop importing Iranian barrels by November following President Donald Trump's decision in May to withdraw the USA from the Iran nuclear deal.

"The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to 4 November will reveal more decisions taken by countries and companies with respect to Iranian oil purchases", the IEA said.

Such concerns have prompted U.S. Energy Secretary Rick Perry to meet his Saudi and Russian counterparts in an effort to convince those two countries to keep oil output high in order to offset a reduction in future Iranian oil exports.

Global demand will hit a high of 100.3 million bpd in the final quarter of this year, before moderating to 99.3 million bpd in the first quarter of next year, the agency said.

The storm could also affect the Colonial Pipeline, which transports oil through North and SC with the latter said to be in the direct path of the storm's eye.

Front-month gasoline futures RBV8 rose 0.5 percent on Wednesday, while heating oil futures HOV8 increased 0.4 percent.