US Weekly Surprise Buildup Puts Crude Rally on Hold

Oil fell on Wednesday after the Energy Information Administration (EIA) reported an unexpected buildup of 7.2 million barrels when the forecast called for a slight drawdown. Crude’s upward momentum was put on pause after the higher supply data point. The API reported yesterday 3 million barrel buildup in US crude stocks and this time it was validated by the EIA with today’s report.

West Texas Intermediate graph

Oil had gained earlier this week after disruptions to supply and OPEC’s production was further reduced in March.

The balance between rising US shale production and the OPEC+ efforts is now tipping in favour of the organization lead by Saudi Arabia. Despite losing the psychological edge by disclosing that its Ghawar oil field is not as large as originally thought, shale production is facing its own problems.

Brent crude graph

The US-China trade deal has been on a positive track, but still no concrete details are available. The tariff war between the two largest economies resulted in a a global growth downgrade impacting energy demand forecasts. US Shale companies are recovering from the drop in oil prices in the Q4 and are scaling back some of their spending.

President Trump is not a fan of higher prices and he has used his tweeter influence with limited short term impact. The OPEC+ deal will remain in price until June with a highly anticipated meeting between producers expected to yield another extension.

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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