Oil has taken Wall Street on a roller coaster ride in the past week. The ride started with oil rising towards $72 ahead of inventory data and then falling below $71 after inventory data.
Oil fell toward $70 a barrel on Wednesday morning amidst U.S. government inventory data showing a build in crude stocks and weak economic data that raised concerns and doubts about oil demand recovery in the worldâ€™s largest energy consumer.
As example of these doubts was shown in U.S. light, sweet crude which fell 81 cents to $70.61 a barrel early in the day giving away some of the gains that helped oil rise 13 percent since last week.
U.S. crude inventories had a sharp rise last week which surprised many experts on Wall Street. According to weekly data from the U.S. Energy Information Administration (EIA), which was released on Wednesday, refinery runs eased while distillate stocks showed a surprise draw. Crude stockpiles rose by 1.7 million barrels in the week of July 31, far surpassing forecasts as refinery utilization fell by 0.1 percentage points to 84.5 percent.
“The big build on crude caught some people by surprise and shows overall weakness in the economy and the unwinding of economic optimism. Nothing in the numbers was very bullish,” said Phil Flynn, analyst at PFGBest Research in Chicago.
While itâ€™s hard to grasp the oil market, there has been great improvement in the last eight months. Expectations that a turnaround in the global economy could lift sagging oil demand has helped send crude up from lows below $33 a barrel in December, with energy traders keeping an eye on equities markets for signs of an economic rebound.
Energy traders are keeping a keen eye on an area of thunderstorms in the Atlantic Ocean which the U.S. National Hurricane Center has said will have a less than 30 percent chance of becoming a tropical storm. Should something develop on this front, investors will look for oil to be affected.