Oil Keeps Rising After US Crude Stocks Drawdown is Larger than Forecasted

Oil prices continued to climb after the Energy Information Administration (EIA) published the weekly crude inventory report with a larger than expected drawdown. The fall of 4.8 million barrels blew away the forecast of 2.5 million barrels.

The official report squashed doubts of a potential inventory increase as per the API data released yesterday. Crude has been trading higher after the news that China and the United States would restart their trade talks with an important meeting in October.

West Texas Intermediate graph

The drawdown of US crude stock kept pushing oil prices higher with more than 2 percent gains for WTI and Brent. Supply and demand fundamentals have been in the background as the trade war dominated the direction of energy prices.

A possible trade deal in the near term and a softening of the US dollar is summing up to a rebound in oil prices, but traders will keep their eyes peeled for trade news as the optimism could prove fleeting.

Brent crude graph

The negative effects of the prolonged trade war will still remain even as there is apparent progress from Beijing and Washington. Growth forecasts have been cut as the result as more protectionist measures and energy demand has taken a hit.

An end to the tariff dispute could take oil prices higher as the Organization of the Petroleum Exporting Countries (OPEC) continues to limit production and geopolitics have reduced the supply contributions of Venezuela and Iran.

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.

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