U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday shortly before the release of the U.S. Energy Information Administration (EIA) weekly inventories report.
Earlier in the session, prices hit their highest level since 2014, supported by OPEC+’s refusal to ramp up production more rapidly against a backdrop of concern about tight energy supply globally.
At 12:18 GMT, December WTI crude oil is trading $77.90, down $0.67 or -0.85%. This is down from a high of $79.39. December Brent crude oil is at $81.96, down $0.60 or -0.73%. The high of the session is $83.44.
Despite the early rise, the buying momentum wasn’t there to extend the move as traders expressed concerns that prices were moving faster than the fundamentals. This notion was fueled by an American Petroleum Institute (API) weekly storage report that showed an unexpected build in crude inventories.
Traders are now awaiting the U.S. government’s weekly inventories report, due to be released at 14:30 GMT. The early estimate calls for an 800,000 draw down, but traders are worried the report could show a build, which would be bearish news. This is one of the reasons for the weakness ahead of the report.
American Petroleum Institute Weekly Inventories Report
The API on Tuesday reported another surprise build in crude oil inventories of 951,000 barrels for the week ending October 1. This compares to analyst expectations for a loss of 300,000 barrels for the week. It was the second consecutive week that the actual number came in worse than the estimate.
The API also reported a build in gasoline inventories – again for the second week in a row – of 3.682 million barrels for the week-ending October 1 – on top of the previous week’s 3.555-million-barrel build.
Distillate stocks saw an increase in inventories of 345,000 barrels for the week, compared to last week’s 2.483-million-barrel increase.
The unexpected API build is helping to pressure prices early Wednesday. If the EIA report also shows a build then look for the selling to continue with $76.11 the minimum downside target.
The strong U.S. Dollar is also weighing on foreign demand for the dollar denominated commodity, but traders seem to be more worried about the possibility of demand destruction from rising crude prices. The biggest concern is that prices are too high given the current fundamentals.
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This article was originally posted on FX Empire