Crude Down Sharply Following Large US Stock Build

Oil prices sank on Wednesday by over 3% and to be down over 5% this week due to a range of factors. Yesterday they fell sharply following EIA data showing a large US crude inventory build. Earlier in the week, the geopolitical premium unwound on hopes that a ceasefire deal on Gaza was imminent. The USD index fell 0.2%.

• WTI fell 3.4% to $79.13/bbl and has started today slightly lower at $79.03. The benchmark is now down 5.6% this week or around $4.75. It reached a high of $81.57 before the EIA data and then fell to a low of $78.83 following the Fed. WTI broke through support at $81.23, 50-day EMA, and $80.70, April 22 low, which opens up scope for a deeper correction to $76.07, March 11 low.
• Brent is 3.4% lower at $83.44 to be down 5.3% this week. It reached a high of $85.89 before falling to $83.29. It broke support at $85.32, 50-day EMA, opening up $80.24.
• EIA reported US crude inventories rose 7.27mn barrels last week while a drawdown was expected. Gasoline stocks rose 344k while distillate fell 732k as refinery utilisation fell 1pp to 87.5%.
• The Fed left rates unchanged as expected but Chair Powell noted that inflation has been “above expectations” and sent the message to markets that while hikes are currently unlikely, rates will be probably be “higher for longer”. Oil had already reacted sharply to the EIA data before the announcement but fell slightly further following it.
• Hopes of a Gaza ceasefire deal had driven markets lower on Monday/Tuesday. US secretary of state Blinken is in Israel for meetings but as of writing Hamas had not yet responded to the internationally agreed proposal which Blinken has urged them to accept.