WTI Tumbles After Huge Crude Inventory Build

Oil prices rebounded today after a 2-day slump on hopes for a US-China deal and Brexit again, despite equity market weakness, weaker global growth (IMF) and plenty of supply (EIA forecasts US shale production surge) sparking concern.

“The encouraging headlines surrounding the U.S.-China trade war and Brexit seem more optimistic,” said Pavel Molchanov, a Houston-based analyst at Raymond James & Associates Inc.

“In that sense, it’s perfectly reasonable for oil prices to show a bit of a bounce.”

But tonight, the algos will be focused on inventories.

API

  • Crude +10.5mm (+3mm exp) - biggest build since Feb 2017

  • Cushing +1.6mm

  • Gasoline -934k

  • Distillates -2.9mm

Analysts expected crude inventories to rise for the 5th week in a row and they did... massively - a 10.5mm build is the largest since Feb 2017

Source: Bloomberg

“The market has plenty of supply in the short-term,” said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago. Investors are “expecting a big increase in supply this week because the refinery runs are so low.”

WTI traded down to around $53.20 ahead of the API data, and tumbled to a $52 handle as the data hit...

Finally, we note that earlier in the day, the International Energy Agency warned that OPEC faces a “serious challenge” if it wants to defend oil prices next year as fuel-demand growth may slow while rival crude producers expand output.