Summary:

  • Weekly DOE inventories +3.0M vs +2.4M exp and -1.6M prior
  • 2nd largest build in 5 months; also higher than last night’s API
  • Oil falls to its lowest level of the day below $66 a barrel

A larger than expected rise in US oil inventories has weighed on the price of crude this afternoon, with the Brent market falling back below the $66 handle. The print of +3.0M in the headline reading was the second largest increase since September and provides further evidence of US stock piles rising as the price has increased. 

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 Brent  Oil has dropped fairly sharply since the release, shedding around 80 ticks in the first 20 minutes since the release. 

Since Brent made a 3-year high above $70 at the end of last month 4 of the 5 DOE readings have shown increases in US inventories with last week seeing the only decline. The drop was also the smallest nominal reading over this period in coming in at -1.6M and shows that the recent trend for the DOE number is higher. 

Recent increase in the rig count suggest that US shale is taking advantage of the recent high price of Oil to ramp up their drilling activity. Today also saw the release of the latest oil production figures with US output now at 10.28M bpd, opening up a gap above Saudi Arabia with the Kingdom producing 9.98M bpd. Russian production is currently at 10.91M bpd and there is a chance that the US may threaten to overtake this in the coming months if price remains around these levels or higher.  

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 Brent Oil printed a daily reversal yesterday and given today’s DOE data could be set for further downside ahead. Source: xStation

The market reaction to the release has been understandably negative with Brent Oil currently trading lower by around 1% on the day. Tuesday saw a bearish engulfing candle print on D1 and in falling below this level today the market has continued to push lower. 64.25 could offer some support but the market may now be headed for a retest of the larger swing support level around 61.25. On the upside the high of the week at 67.67 is an area to look for possible resistance with a break above here needed to negate the bearish reversal signal offered yesterday.