U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Wednesday, but off the highs achieved the previous session. Traders blamed a surprise build in U.S. crude stockpiles for the lack of buying.
Helping to drive the markets higher on Tuesday was a report from Bloomberg. Citing unnamed Saudi sources, Bloomberg said the kingdom was currently comfortable with prices above $80 per barrel, at least for short-term.
Bloomberg also said that while Saudi Arabia had no desire to push prices higher than $80, it may no longer be possible to avoid it.
Ministers from OPEC nations and non-OPEC producers are scheduled to meet on Sunday to discuss compliance with output policies. Reuters said, according to OPEC sources, that the cartel has no immediate action planned and that producers would discuss how to share a previously agreed output increase.
Late Tuesday, the American Petroleum Institute (API) reported an unexpected build of 1.25 million barrels of United States crude oil inventories for the week-ending September 14. Analysts were looking for a draw of 2.741 million barrels.
The API also reported a draw in gasoline inventories in the amount of 1.485 million barrels. Analysts had forecast a small draw of 104,000 barrels.
Distillate inventories were up by 1.536 million barrels, compared to an expected build of 651,000 barrels. Inventories at the Cushing, Oklahoma futures hub decreased by 1.57 million barrels.
With both WTI and Brent futures trading just slightly below their highs for the year, investors seem a little reluctant to buy at current price levels early Wednesday. They are likely waiting for today’s U.S. Energy Information Administration’s weekly inventories report, due to be released at 1430 GMT. It is expected to show a draw of 2.7 million barrels. However, given the surprise build in the API report, traders may be expressing doubts in the accuracy of this forecast.
The direction of the market today is likely to be determined by trader reaction to the EIA report. A surprise build is likely to put a limit on gains. It could also cause a sell-off, but these losses will be contained due to supply concerns because of the Iran sanctions.
A drawdown will underpin prices. A bigger-than-expected draw could trigger a surge to the upside with the yearly highs possible targets.
This article was originally posted on FX Empire
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