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Crude Oil Price Slumps on Small Decrease in Stockpiles

10 August, 2018, 14:46 | Author: Shawna Walton
  • Crude Oil Supply

Oil prices remain range-bound.

On Wednesday, the U.S. Energy Information Administration reported a surprise build of 3.8 million barrels in commercial crude oil inventories.

EIA reported a draw of 1.35 million barrels of crude oil inventory for the week ending August 3, which was lower than market's expectation of 3.1 million barrels draw.

"The US is pursuing a strategy to aggressively curb Iranian oil exports by November", UBS analysts led by Giovanni Staunovo wrote in a note.

As the U.S.re-instated its first set of sanctions against Iran yesterday, we could see further rhetoric from Iran about lost oil supplies and OPEC not being responsible for filling the supply gap, Peterson noted.

"Of course, such decisions being taken by the USA side are absolutely unfriendly and can hardly be associated with the. constructive atmosphere achieved at the latest meeting of the two presidents", he was quoted by Russian news agency Tass as saying.

"While there's still some uncertainty about what will happen to Iranian oil, we think there probably won't be a significant impact on oil prices".

U.S. West Texas Intermediate (WTI) crude futures fell $2.70 to $66.47 a barrel, a 3.9 percent loss. By contrast, both Brent crude in London and West Texas Intermediate in NY are little changed this month. On one hand, fears of an all-out trade war provides resistance for the price to move higher. If more oil leaves the market than expected then the bulls will win the supply/demand battle.

Oil prices slumped Wednesday after Beijing announced it would retaliate against the Trump administration with a 25% tariff on another $16 billion worth of United States products, including crude exports to China.

The Energy Information Administration is scheduled to release the data on US crude stockpiles, at 10:30 AM ET on Wednesday.

However, Iranian oil exports to its top two customers-China and India-continued to stay high last month.

Iranian oil production fell to 3.72 million b/d in July - the lowest since January 2017, according to Platts estimates. The negative trend in oil prices also harmed by the rise of the dollar exchange rate, which leads to the weakening of other commodities priced in the U.S. currency, such as crude oil.

Distillate stockpiles, which include diesel and heating oil, rose by 1.2 million barrels, versus expectations for a 220,000 barrels increase, the EIA data showed.

Crude oil prices are under pressure because a tariff on imported US crude oil means a drop in demand.

"The price action does not do the contract any favor as it shows how speculative day-traders remain firmly in control and with that we can see temporary dislocations to the global market", said Ole Sloth Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

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