U.S. West Texas Intermediate and international-benchmark Brent crude oil are under pressure early Wednesday in reaction to a private industry report that showed a surprise build in U.S. crude inventories.
At 0733 GMT, May WTI crude oil is trading $64.70, down $0.55 or -0.84% and June Brent is at $68.85, down $0.61 or -0.88%.
According to the American Petroleum Institute (API), U.S. crude inventories rose 5.321 million barrels during the week-ending March 23. Analysts were looking for very little change. Last week, the API reported a surprise draw of 2.739 million barrels for the week-ending March 16. Traders were looking for a build of a similar amount.
The API data also showed a 1.655-million crude inventory build at Cushing, Oklahoma, the U.S. futures hub. The API also reported a gasoline draw of 5.799 million barrels, and a distillate draw of 2.23 million barrels.
Additionally, U.S. crude oil production, which for the week-ending March 16 increased to 10.407 million bpd, up from 10.381 million bpd the week prior.
Forecast
Wednesday’s price action is likely to be determined by trader reaction to the U.S. Energy Information Administration’s weekly inventories report. It is expected to show a build of about 500,000 barrels, up from last week’s 2.6 million barrel draw down.
The estimate is likely to change since the API number exceeded expectations. Nonetheless, a bigger than expected build is likely to keep the pressure on crude oil. The markets could flatten or even rally if the EIA data is bullish.
Crude oil traders will also be watching the price action in the U.S. Dollar, investor appetite for risk and any news pertaining to a possible trade war between China and the U.S.
The daily chart indicates the primary downside target for May WTI crude oil is $63.36 to $62.61. The near-term downside target for June Brent crude oil is $66.85 to $66.01.
The markets formed a technically bearish closing price reversal top chart pattern on Tuesday. If this chart pattern is confirmed on Wednesday, we could see the start of a 2 to 3 day correction.