Oil prices slump after large build in US stockpiles

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At the same conference, India's PM Narendra Modi also sat down with ministers and chief executives of oil companies and sought a review of payment terms for crude oil supplies.

A Chinese man works at a pump jack in PetroChina's Daqing oil field in China's northeastern Heilongjiang province March 18, 2006.

US West Texas Intermediate crude was up 35 cents, or 0.5 percent, at $72.27 a barrel by 0007 GMT on Wednesday, having settled up 14 cents.

"Growing tensions over the disappearance of journalist Jamal Khashoggi at the Saudi consulate in Istanbul has proved supportive", said ING commodities strategist Warren Patterson.

"Today's price decline to below our expected support at the $70 level would appear to set the trade up for a weaker pricing environment than we had anticipated", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. "There is nothing new to repeat", he said.

Brent crude was down 50 cents a barrel at $80.28 by 1320 GMT.

Jim Ritterbusch, president of Ritterbusch and Associates, said Saudi Arabia could cut as much as 500,000 barrels per day of crude production "as a warning shot should the United States opt to impose any type of sanction in response to the Khashoggi developments".

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USA oil production has increased steadily over the last five years, reaching a record high of 11.2 million bpd in the week to October 5.

US President Donald Trump gave Saudi Arabia the benefit of the doubt in the case even as US lawmakers pointed the finger at the Saudi leadership and Western pressure mounted on Riyadh to provide answers.

"To strengthen relations with India is a strategic priority of the Kingdom of Saudi Arabia", he said.

On Wednesday, Trump denied that he is giving cover to the Saudis, and that the results of the investigation into Khashoggi's death should be known within a week. Senior officials on Monday had said that Indian oil companies have optional volumes built in their annual crude oil purchase contracts with suppliers like Saudi Arabia and Iraq that will be more than enough to make up for any shortfall in supplies from sanctions-hit Iran.

Ritterbusch of Ritterbusch and Associates said Saudi Arabia could cut as much as 500,000 bpd of crude production "as a warning shot" to discourage US sanctions.

"The oil price pain being now felt would have been much worse if we had believed people who 4-5 years ago said that oil demand had peaked and would decline", Mr. Al-Falih added.

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