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Crude Prices Fall on Inventory Surplus Fallout

Crude oil has fallen to a 2-month low on Thursday. Crude has slipped below the $52 level in the aftermath of another crude inventory surplus and the main trend is down.
Kenny Fisher
oil field, the oil workers are working

U.S. crude prices are trading sideways on Thursday. In the North American session, WTI is trading at $51.95, down $0.56, or 1.12%. Brent crude is trading at $57.02 down $0.42, or 0.83%.

Crude Slips on Inventory Surplus

U.S. crude prices remain under pressure. Crude slipped 4.0% last week and has declined a further 7.4% this week. On Wednesday, the Energy Information Administration (EIA) reported a surplus of 3.0 million barrels, above the estimate of 2.0 million. This reading marked a third successive surplus in crude stockpiles, which has put downward pressure on oil prices. Crude responded with losses of almost 3.0% on Wednesday and fell to 52.25, its lowest level since August 5. Crude has not posted a winning daily session since September 23. It was less than three weeks ago that an attack on a Saudi oil refinery triggered double-digit gains in crude prices. However, the spike in crude now seems like a distant memory, as crude has given up all of these gains and then some.

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Will Slowdown Push Crude Below $50?

A weak global economy could spell trouble for crude oil prices. The U.S. and China are the world’s largest consumers of crude, and with both economies experiencing a slowdown, crude prices could continue to fall. The U.S. economy grew by just 2.0% in Q2, compared to growth of 3.1% in the first quarter. The trade war with the U.S. has taken a toll on China’s economy and the manufacturing sector has been in contraction mode as exports have fallen off. Is crude headed to $50? This support level has not seen action since December. Although the trend for crude is lower, instability in the Persian Gulf could quickly reverse the recent losses sustained by crude. Tensions between Iran and the U.S. have eased ever so slightly, but any negative developments could cause investment jitters and send crude prices higher.

WTI/USD 4-Hour Chart
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