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This isn’t what oil markets needed after OPEC talks last weekend revealed the deep fissures among OPEC members that stand in the way of an agreement to reduce production emerging from the organization’s November 30 meeting.

This morning the U.S. Energy Information Administration announced that U.S. crude inventories had climbed by 14.4 million barrels for the week that ended on October 28. That’s the biggest increase in inventories ever in data that stretches back to 1982. Energy analysts had expected that inventories would climb but by a much more restrained 1.013 million barrels. Imports into the United States surged by 28%, the highest rate of increase in four years.

The surge in inventories sentU.S. benchmark West Texas Intermediate crude back toward the $45 level with the market dropping 2.49% to $45.51 a barrel. International benchmark Brent crude dropped 2.1% to $47.13.

The drop to near $45 for West Texas Intermediate immediately produced talk of oil falling through that level to retest $40 a barrel. That’s reasonable talk since the OPEC meeting that might reverse the tumble in the oil market isn’t scheduled until November 30 and since oil prices are now where they were before OPEC’s meeting in Algiers at the end of September raised hopes that OPEC would agree to cut production. (Of course, that November 30 meeting could produce disappointment too–personally I think that’s more likely than a real agreement to curtail production–but one way or another the November 30 meeting is the next event on the calendar with the potential to change the trend in the oil market.)

The increase in supplies left U.S. inventories at 482.6 million barrels, the highest seasonally adjusted level in more than 20 years.

Oil industry analysts are projecting that OPEC pumped a record 34.02 million barrels a day in October, an increase of 170,000 barrels a day over the September level. (The increase was led by Libya, Nigeria, and Iran, the three countries exempted from production cuts at the Algiers meeting. Iraq, which is demanding an exemption as well, increased production by 50,000 barrels a day.) In the U.S. production increased by 0.02% to 8.5 million barrels a day, not a big move certainly but one pointed in the wrong direction.

My thought at this point is that some of the U.S. oil shale producers with the lowest break-even costs would start to look very interesting again with oil near $40 a barrel.