Crude Decline Continues, Investors Brace for Inventories Surplus

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Updated: Oct 2, 2019, 13:48 GMT+00:00

WTI Crude remains under pressure and has fallen below the $54 level on Wednesday. The EIA will release its weekly inventory report at 15:30 GMT and analysts expect a large surplus, which could send crude prices lower.

Crude Decline Continues, Investors Brace for Inventories Surplus

U.S. crude prices continue to dip lower. On Wednesday, WTI is trading at $53.37, down $0.67, or 1.25%. Brent crude is trading at $58.32, down $0.88, or 1.49%.

EIA Surplus Could Send Crude Lower

U.S. crude prices continue to head south this week. Crude has not posted a winning daily session since September 23. As well, the spectacular gains (12.8%) after the attack on a Saudi Arabian oil refinery have been erased. The downward trend could continue on Wednesday, as the Energy Information Administration (EIA) has forecast a surplus of 2.0 million barrels. The previous two readings showed a surplus in stockpiles and another surplus will weigh on crude prices. There was a surprising development on Tuesday, as the American Petroleum Institute (API) reported a large drawdown of 5.9 million barrels. However, the reading failed to stem the downward movement of U.S. crude prices.

Slowdown in U.S.,China Could Spell Trouble

The U.S. and China are the world’s largest consumers of crude, and with both economies experiencing a slowdown, crude prices could continue to fall. The U.S. economy grew by just 2.0% in Q2, compared to growth of 3.1% in the first quarter. In China, the economy has been hampered by the trade war with the U.S., and the manufacturing sector has been in contraction mode as exports have fallen off. Weak global economic conditions have also reduced demand for crude, and the lack of appetite for crude could result in prices continuing to decline. One key reason that oil prices have not fallen below the $50 level is geopolitical instability, in particular in the Persian Gulf. The recent attack on a Saudi oil refinery triggered double-digit gains for crude, and exposed the vulnerability of oil supplies. A breakout of hostilities involving Iran and its neighbors could boost sagging oil prices.

About the Author

Kenny Fisherauthor

Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.