Crude Oil Drops as Harvey Swamps Inventories

Crude couldn’t rally on much lower inventories as Harvey and spread trading swamps Brent Crude finally.

Hurricane Harvey submerged another massive drawdown in the official U.S. Crude Inventories last night, washing Brent by two percent in the process. The reduction came in at -5.4 million barrels against an expected 1.75 million drawdown. It continues the trend of falling oil in storage in the U.S. The data, however, was collected pre-Harvey and with fully 25% of the U.S. refining capacity offline, the stress is being felt in refined downstream products with gasoline process hitting two-year highs. Next week’s inventory numbers, should the data even be able to be collected, will likely show a substantial increase as crude pumped out of the ground searches for a refinery home to go to that isn’t under water.


Brent spot fell from 51.75 to 50.75, trading in Asia a smidgen higher at 50.85 this morning. It has broken a rising trend line support at 51.10 in the process which becomes intraday resistance. Must hold support now is a triple bottom at 49.90 with a daily close implying a deeper correction is possible to the 47.00 area. Until this line is broken, however, the technical picture remains that Brent is in a long term consolidation of its past month’s gains.


WTI spot, by contrast, fell only 50 cents overnight from 46.20 to 45.70, opening in Asia at 45.80. The relative outperformance versus Brent could be due to a couple of factors. Firstly, a lot of Hurricane Harvey bad news is now built into the price against a background of lower inventories anyway. Secondly, with the premium of Brent over WTI having moved to multi-year highs, traders may have been tempted to sell Brent and buy WTI to take advantage of this.

WTI spot has support at the 45.00 area and resistance at 47.00, but will most likely trade of Harvey headlines and spread traders.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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