Crude Oil Plunges Below $70 – Top Two Reasons Explained!

Posted Thursday, October 18, 2018 by
Arslan Butt • 1 min read

On Wednesday, the WTI crude oil prices fell below $70 for the first time in a month to trade near $69.25.

Here are the two main reasons:

EIA Crude Oil Inventories
A day before, the EIA (Energy Information Administration) released the stockpiles figures which revealed that the US crude stocks grew 6.5 million barrels last week, the fourth consecutive weekly build, as exports were down to 1.8 million barrels per day. Economists were expecting a build of 1.6M barrels. Well, that’s exactly what we planned to trade in our previous update Crude Oil Standstill – It’s Time to Trade The Range.

Looks like, the US-China trade war has started influencing the demand for crude oil.

Hawkish FOMC Meeting Minutes

As discussed earlier, the minutes from the Federal Reserve’s September meeting connected expectations for further interest rate hikes by the US central bank and the investors increased their bets on the US dollar.

Fellas, crude oil and the US dollar share a strong negative correlation as the WTI crude oil is denominated in the dollar currency.

Which means a stronger dollar makes crude oil expensive for foreign investors. As a result, investors feel hesitant to invest in crude products and this reduces the demand for it. Thus, the prices of crude oil begin to drop.

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