Crude prices have moved sharply lower into the back end of the week following the latest report from the Energy Information Administration.
Despite the API reporting a large build in US crude stores, the EIA showed that in the week ending January 3rd, US crude stores were higher by 1.2 million barrels over the week. This takes the total inventory level back up to 431.1 million barrels. The reading was in stark contrast to the expected 3.6 million barrel decrease the market was looking for.
Despite the increase in total inventories, crude stores at the Cushing delivery hub in Oklahoma, the largest site in the US, were lower by over 800k barrels on the week.
Refinery crude runs were also lower over the week by 368k barrels. This marked a 1.5% fall in refinery utilization rates.
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Gasoline & Distillate Inventories Higher
Elsewhere, the report showed that US gasoline inventories were also higher last week. They rose by 9.1 million barrels, taking the total inventory level to 251.6 million barrels. This was far higher than the 2.7 million barrel increase the market was looking for.
The report also showed that distillate stockpiles were higher over the week. Distillate inventories, which include diesel and heating oil, were higher by 5.3 million barrels. The result took the total inventory level in distillates up to 139 million barrels. This again was far higher than the 3.9 million barrel increase projected by analysts.
Finally, the report showed that net US crude imports were higher by 1.78 million barrels over the week.
US/Iran Tensions Impacting Crude
Its been a volatile week for crude prices given the initial upside surge seen in response to news of an escalation in tensions between the US and Iran.
Following the US killing of a top Iranian general last week, Iran finally retaliated overnight on Wednesday with missile attacks on two US army bases in Iraq.
The attack fuelled a sudden wave of risk aversion across markets that saw equities cratering lower while safe havens rallied.
Crude was higher too, initially. However, it has since reversed sharply lower from highs above 64. As yet, no US retaliation has been enacted. But, the market is waiting to see how America will respond.
Any further action could see crude prices sharply higher once again.
The reversal lower in crude has taken price back under the 63.13 level. Price is quickly approaching the broken bearish trend line where we also have structural support at the 60 level. While above here, further upside remains likely. Back under here, however, will put focus on a move to deeper support at the 57 level.