Oil Prices Below $80 After Massive Buildup in EIA Inventories

Oil prices continued to dive lower today, with WTI falling more than $2. The massive buildup in EIA inventories added to the decline, sending crude Oil below the 200 daily SMA, breaking below the $80 level as well for the first time since the middle of March.

Oil prices are currently declining due to the prospect of a political solution in Gaza. The prospect of a gradual reduction of hostilities in the next weeks could lead to long-term calm in the region, which is negative for crude oil. This development spurred selling in the Oil markets yesterday, with the price of WTI (West Texas Intermediate) falling to $82.40, while today the decline has stretched further to $79lows, which is the lowest level since the middle of March.

Crude Oil Chart Daily – The 200 SMA Has Been Broken

The calmer tensions are reducing the geopolitical risk premium in Oil prices, hence the decline. The 200 SMA (purple) has been broken, as well as the round level at $80. but now sellers are facing the 100 SMA (green0 which might provide some form of support. However, fundamentals are not positive, with the EIA inventories showing a massive buildup today.

Weekly US EIA oil inventory data

• Crude oil inventories rose by 7,265,000 barrels, contrary to the expected decrease of 1,100,000 barrels. The previous figure showed a decrease of 6,368,000 barrels.
• Gasoline inventories increased by 344,000 barrels, while a decrease of 1,060,000 barrels was expected.
• Distillates inventories decreased by 732,000 barrels, compared to an expected decrease of 225,000 barrels.
• Refinery utilization decreased by 1.0%, against an expected increase of 0.5%.
• Implied gasoline demand was recorded at 8.42 million barrels per day (mbpd), consistent with the previous figure.
• US oil production remained unchanged at 13.1 mbpd.

Private oil data from late yesterday showed:

• Crude inventories increased by 4,906,000 barrels.
• Gasoline inventories decreased by 1,480,000 barrels.
• Distillates inventories decreased by 2,187,000 barrels.
• Cushing inventories increased by 1,479,000 barrels.

Besides that, in the United States, recent inflation data and the Federal Reserve’s firm stance on interest rates have tempered expectations for rate cuts, limiting potential increases in oil prices. As the Federal Reserve is expected to maintain interest rates at 5.50%, attention turns to Fed Chair Jerome Powell’s later today, scheduled press conference for further insights into interest rate policy. The consistently high interest rate environment may bolster the US dollar, thereby exerting downward pressure on oil prices denominated in USD.

US WTI Crude Oil Live Chart