|News||Crude oil slumps on a strong dollar and rising inventories|
|Analysis||Crude oil is trending lower this morning for the second consecutive data after the heavy losses recorded yesterday on rising inventories and dimmed prospects for further Fed easing. Crude oil once again is stable below $105 per barrel and seemingly eyes the retest of $102 areas again.|
WTI futures for May settlement are trending south this morning and currently hovering around $103.52 per barrel extending the losses recorded yesterday. The contract started the day at $103.97 recording the high close at $104.02 and slumping so far to the low of $103.50 per barrel.
Oil is trading lower for the second consecutive day after it slumped on the Fed comments yesterday and the reported buildup in inventories from the API ahead of the key EIA report today. Crude oil rose to retest $105 levels earlier this week and now back towards $103 areas after yesterday it slumped from the high set at $105.15 to close at $103.95 per barrel.
The FOMC minutes were surely a downside pressure for broad markets as the comments from the feds downplayed chances for more easing for now. The dollar gained grounds on the comments as the Federal Reserve sees signs of stability in the economy and improvement in the labor market, but assure that the recovery is still gradual and not at full speed and they stand ready to add more support if growth slows, especially as they lowered their expectations for real growth.
This was surely a negative input for crude and pushed the commodity to the downside, especially as now the focus is on growth and demand with eased tension over disrupted supply and the geopolitical tension.
More downbeat new from the United States pushed oil further south as the data from API showed that supplies rose 7.8 million barrels last week ahead of the EIA report today that is expected also to show a strong 2.5 million barrel buildup in inventories.
We can see the downside pressure building on crude for now, where with the strong dollar, rising inventories, and eased supply woes the downside pressure is evident. With the talk between the U.S. and Europe to release strategic oil reserves the Iran tension is overshadowed, and Saudi Arabia added its print on crude by assuring that the high production levels will still be maintained even with the release of strategic oil supplies.
Volatility is expected today still with the market assessing still the FOMC minutes and turning to Draghi for comments on the current situation in the euro area as the ECB is expected to keep the policy unchanged.
Meanwhile, the expected buildup in crude inventories according to the EIA report expectations shall keep the downside pressure yet we need to remind you that gasoline inventories are the major attention now and any deep drop will be good demand indication with the start of the driving season. API reported a 4.5 million barrels drop in inventories yesterday and the EIA is expected to report 1.4 million barrel drop today.