U.S. West Texas Intermediate and international-benchmark crude oil closed lower on Wednesday after the U.S. Energy Information Administration (EIA) said crude oil stockpiles fell more than expected last week as refineries increased output, but gasoline and distillate inventories posted unexpectedly large builds.
Traders drove prices higher initially on the crude oil news, but the rally was stopped and prices turned lower in reaction to the gasoline and distillate reports.
January WTI crude oil settled at $55.96, down $1.66 or -2.88% and February Brent crude oil finished the session at $61.22, down $1.64 or -2.61%.
According to the EIA, crude inventories fell 5.6 million barrels in the week to December 1, compared with analysts’ expectations for a decrease of 3.4 million barrels. At 448.1 million barrels, crude stocks, not including the strategic petroleum reserve, were at their lowest since October 2015.
Gasoline stocks rose 6.8 million barrels. Analysts’ were looking for a 1.7 million-barrel gain. Distillate stockpiles, which include diesel and heating oil, rose 1.7 million barrels, versus expectations for a 1 million-barrel increase, the EIA data showed.
Crude oil is under pressure on Thursday as investors continue to react to Wednesday’s EIA report. Technical factors are also playing a role in the weakness.
Prices fell sharply on Wednesday after a larger-than-expected rise in gasoline inventories. This suggests that refiners may not need to process as much crude in the future. Another rise in production also helped pressure prices.
The EIA report showed that U.S. production increased again. U.S. crude production climbed by 25,000 barrels per day (bpd) to 9.71 million bpd, the highest since monthly figures showing the United States produced more than 10 million bpd in the early 1970s.
Technically, the trend changed to down on the daily chart and the market crossed to the weak side of a retracement zone. The downside momentum created by the move suggests the market is headed to at least $55.00 over the near-term. On the upside, the resistance is $56.55 to $57.03.
This article was originally posted on FX Empire