Oil Drops after Monster Surprise Buildup of US Inventories

Oil prices fell on Wednesday after the Energy Information Administration (EIA) published the weekly US crude inventories. The surprise buildup of 6.8 million barrels of crude and 3.2 million barrels of gasoline put downward pressure on energy prices. Brent fell 2.28 percentage and WTI recorded a loss of 3.31 percentage as the US dollar also found its footing and rose against major pairs.

West Texas Intermediate graph

A rate cut by the U.S. Federal Reserve is rising in probability and with it the greenback has lost its appeal as investors are seeking yield elsewhere. Trade wars have kept the US dollar bid and were in a factor in the rebound seen on Wednesday.

Brent crude graph

Rising US production is more than offsetting the efforts from the OPEC+ and if we add the negative effect a trade war could have on energy demand the result is lower prices. Russia has not been totally on board with rejoining the agreement to cut output after it ends in June, without a major producer the weight of the cuts would be even more on Saudi Arabia.

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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