The oil price slumped on Tuesday after signs of a larger-than-expected build in crude stocks in the United States.
USOIL – Daily Chart
The price of US Oil trades was trading at $76.73 in Wednesday’s US session after a drop through $80 on Tuesday. The market had support at $7766, now the resistance to repair the damage.
Oil prices fell to their lowest level over three months, with mixed Chinese economic data also being a driver. US crude oil stocks rose by almost 12 million barrels last week, market sources said on Tuesday, citing American Petroleum Institute figures. That number comes before the official US Energy Information Administration (EIA) number each week. Still, the EIA has delayed its data release until next week.
Crude oil production in the United States this year is expected to rise by slightly less than initial estimates, the EIA said on Tuesday. The group now expects total petroleum consumption in the country to fall by 300,000 barrels per day (bpd) this year, reversing an earlier forecast of a 100,000 bpd increase.
Data from China’s economy, the world’s biggest oil consumer, also raised doubts about the demand picture. Crude oil imports by China in October showed robust growth. Still, its total exports of goods and services contracted faster than expected, adding to fears of lower global energy demand. Further pressure on oil has been a rise in US dollar prices, which makes it more expensive for importers overseas.
However, Goldman Sachs’ Daan Struyven said that OPEC could support the price of oil and that supply should continue to tighten.
There is still the potential for war-driven gains in oil if tensions continue in the Middle East.
The risks of a more significant conflict have receded, and there is hope that a ceasefire will occur. The EIA inventory number next week and the situation in the Middle East should be a key focus for traders looking to find a low in the oil price.
Production cuts in the OPEC group have seen many tankers heading to the US for supplies. Bloomberg said 48 vessels are heading for the US in the next three months, the largest in three years.