Oil Mixed After EIA Report Shows Large Drawdown

Oil fell on Wednesday after the release of the Energy Information Administration (EIA) weekly crude inventories report showed a larger drawdown than anticipated at 3.1 million barrels of crude, a surprise buildup of 3.6 million barrels of gasoline and a larger than expected buildup of distillates at 5.7 million barrels.

While a crude drawdown was expected the rise of distillates and gasoline moved the needle lower for oil prices as fears of oversupply remain.

West Texas Intermediate graph

Weather related supply disruptions in the Gulf of Mexico affected around 70 percent of production in the area, but it will slowly get back online, but could lead to lower stock data in the next weekly report.

Easing of tensions between the US and Iran, mixed Chinese growth data and storm hit operations getting back online are all pressuring oil prices downward.

Brent crude graph

Oil prices were lower on Tuesday as Middle East tensions eased after comments from US Secretary of Sate Mike Pompeo about Iran’s willingness to negotiate.

Previously Iran had a more aggressive stance, but after President Hassan Rouhani said on Sunday that Iran is ready to hold talks if sanctions were lifted, a diplomatic avenue thought to be exhausted came back into play although it did so at the same time of the threat of higher uranium enrichment. Tensions could still flare up as Iran denies it is ready to negotiate on its missile program.

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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