Crude Oil Drops after Surprise US Weekly Buildup

Oil prices fell on Wednesday after the release of the US weekly crude inventories. The report by the Energy Information Administration (EIA) showed a larger than expected buildup of 6.5 million barrels, when the forecast called for a small drawdown of 1.5 million barrels. Yesterday the API oil inventory report came in with a -2.1 million barrels setting the market for a surprise.

West Texas Intermediate is trading under $70 as crude prices have been hit by the bigger than expected buildup in the US.


West Texas Intermediate graph

Supply and demand have been in the background this week as the disappearance of a Jamal Khashoggi has put the spotlight on Saudi Arabia and not in a good way. The Kingdom does not take criticism lightly and issued some statements that have since been walked back as cooler heads have prevailed.


West Texas Intermediate graph

Iranian sanctions have created supply anxiety and Saudi Arabia as the de facto leader of OPEC has not increased production to the US President’s liking as prices rose. Higher inventories will put less pressure on Saudi Arabia on the supply side, as the diplomatic tension continues to be high ahead of the Future Investment Initiative next week.

Rhetoric and diplomacy will guide the oil market for the remainder of the week as more information is known on the whereabouts of the missing journalist and the different official statements from world leaders on the issue.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza