EIA Reports Higher Inventories of US Crude Oil, Mini Price Rally Collapses

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Oil prices rallied as much as 30% from their lows in August but prices found resistance as they approached $50/barrel.

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Higher than expected inventory data helped bring crude back down to its price range last week. Prices have traded between $43-$50/barrel for almost 2 months.

Crude oil price fluctuating within trading range for almost 2 months

Crude oil prices fluctuating within trading range for almost 2 months. Source: MetalMiner analysis of @StockCharts.com data.

The Energy Information Administration report showed that US stockpiles rose by 8 million barrels in the week ended Oct. 16, well above expectations. Inventories dropped through the spring and summer, but it looks like they have resumed a rising trend and now stand at 476 million barrels, near their highest levels in 80 years. The report also showed robust domestic production at more than 9 million barrels.

US total crude inventories

US total crude inventories. Source: EIA.

Time will tell whether prices hit major bottom in August or if more price drops are to come. So far, prices are showing a lack of upside momentum, underscoring a lack of market confidence.

Strong production data and expectations that oil markets could be flooded by 500,000 barrels per day, once Iran’s oil sanctions are lifted, are hitting investor sentiment. Moreover, weakness in commodities markets across the board is really not helping push oil prices up.

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We are seeing similar behavior in base metals, where rallies are short-lived as investors haven’t found the confidence necessary to lift prices. The $50 a barrel and $43 barrel levels are 2 to watch.

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