Oil prices have been dipping due to an increase in US crude inventories last week. There was a build of 12m barrels for the US stockpile inventories, much higher than the expected 3.3m barrels. This significant inventory increase has had a negative impact on oil prices, with WTI Crude futures swinging wildly on Wednesday, finishing down over 1.5% after being up 1.16% just before the release.
Unexpected Increase in US Inventory Weighs on Oil Prices Amid Demand Worries
Gasoline and distillate went in the opposite direction and declined, the reason likely being BP’s (LON: BP) shutdown of its Whiting and Indiana oil refineries, the biggest in the Midwest. The Whiting refinery underwent an extensive modernisation project that was completed in 2013. It cost over $4.2bn and greatly increased the refinery’s capacity to process crude oil. When a refinery of this magnitude is down, it has a noticeable impact on gasoline production.
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Looking ahead, the upcoming monthly crude oil inventory reports from the IEA and OPEC will be watched closely by investors as they will give a better idea of the supply that’s hitting the market. Oil prices have moved higher in the past two weeks because of supply risks due to the Middle East conflict and potential restocking by China, the US and Europe. The next OPEC monthly report is on 12th March and will help assess whether production cuts stay in place in the near term.
WTI futures are up 6.05% YTD, and technicals are generally pointing toward upside potential. The oil market is one of the most volatile, and prices can fluctuate dramatically. An interesting feature on the charts is that CL futures is trading just below its 200 moving average. Will we see it cross back above before the next EIA inventory report?
