Crude Prices Slip After Large Crude Inventory Surplus

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Updated: Oct 30, 2019, 15:51 GMT+00:00

Crude has lost ground on Wednesday, after the U.S. reported a large inventory buildup. Crude prices have fallen 3.0% this week and the downward trend could continue.

Crude oil has posted losses for a third successive day. In the North American session, U.S. West Texas Intermediate crude oil futures are trading at $54.51, down $0.91 or 1.68% on the day. Brent crude oil futures are trading at $60.96, down $0.62 or 1.0%.

Crude Buildup Weighs on Oil Prices

Investors continue to focus on supply and demand fundamentals with regard to crude. This was again evident on Wednesday, as the Energy Information Administration (EIA) weekly report noted a surge in crude stockpiles – the surplus of 5.7 million barrels smashed the estimate of 0.5 million. Just two weeks ago, the EIA reported a whopping surplus of 9.3 million. Last week’s drawdown may well have been a temporary blip in what has been a streak of surpluses. Crude has fallen over 11% since mid-September, when prices jumped above $61 after the attack on two Saudi oil refineries.

With oil prices under downward pressure, how will OPEC react? The current OPEC agreement runs out in December, and there will likely be a push to continue to reduce output and boost crude prices. Historically, however, OPEC members have had difficulty enforcing agreements on lower output quotas, with some countries cheating on quotas in order to protect their revenue from oil exports.

Crude Technical Analysis

Crude prices continue to flirt with the 50-EMA, which is currently just above the price of WTI, at $55.24. Crude has broken below this line for a second straight day. This is a bearish signal which means that traders should be prepared for further downward movement. Below, we find support at 53.00. This line was tested in mid-October, and could face pressure as early as this week. On the upside, there is resistance at the 58.00 level.

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.