Crude Oil Flat as Investors Eye U.S. Inventory Data

U.S. WTI Crude oil futures were under pressure early in the session, but recovered enough to move unchanged to slightly higher for the session. Influencing the price action was the movement by the U.S. Dollar and the American Petroleum Institute’s weekly report.

Crude oil futures initially weakened on Wednesday after the U.S. Dollar firmed around a three-week high and the API report showed an inventory build.

October crude oil futures weakened to $45.75 before rallying to $46.38, up $0.03 or +0.06%. International benchmark Brent crude oil futures were trading at $48.40 per barrel, up $0.03 or +0.06%.

The U.S. Dollar started out higher, but the lack of buyers drove it back to unchanged for the day. Trading is light and volume in low in both the Forex and crude oil markets ahead of today’s ADP private sector jobs report. Many major players are also on the sidelines ahead of manufacturing data from China on Thursday and Friday’s major U.S. Non-Farm Payrolls report.

A strong dollar tends to pressure dollar-denominated crude oil because it makes the commodity more expensive to foreign traders, thus lowering demand.

Oil traders also reacted to Tuesday’s release of the latest inventory data from the American Petroleum Institute. The report showed that crude oil inventory rose to 940,000 million barrels. This was largely in line with expectations, and sharply lower than the 4.46 million build seen last week.

The data suggests that investors should continue to be concerned about the over-supply situation. However, there may be some relief coming if there is a pick-up in seasonal demand for gasoline.

The API report showed a 1.6 million barrel drawdown in gasoline stocks, following last week’s draw of 2.1 million. However, inventory of distillates continued to rise. This week’s report showed an increase of 3.0 million barrels.

In addition to the immediate reaction caused by the API report and the price action of the U.S. Dollar, investors continue to react to the possibility of potential OPEC action to curb production in September. Also underpinning prices are concerns over potential disruptions to supplies in the Gulf of Mexico from Wednesday to Friday due to tropical storm activity with just over 20% of output in the Gulf shut down for a few days.

On Wednesday at 1430 GMT, investors will get the opportunity to react to the latest inventory data from the U.S. Energy Information Administration (EIA). Its report is expected to show a 1.0 million barrel build for the week-ending August 26. Last week’s report showed a 2.5 million barrel build.