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James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower shortly before the regular session opening. Despite forming a potentially bullish closing price reversal bottom on Tuesday, traders are a little hesitant to buy after a private industry report released late Tuesday, showed an unexpected inventory build.

At 10:00 GMT, March WTI crude oil is trading $58.03, down $0.23 or -0.39% and March Brent crude oil is at $64.21, down $0.28 or -0.43%.

In addition to the surprise build in oil inventory, crude oil is also being pressured by uncertainty about the effectiveness of the U.S.-China Phase One trade deal after a top U.S. official said tariffs on Chinese goods would stay in place even after the agreement is signed.

On Monday, U.S. Treasury Secretary Steven Mnuchin said tariffs on Chinese goods will be in place until the completion of a Phase Two agreement. This rattled crude oil traders because it dampened hope the trade deal would lead to demand growth. As it stands, keeping the tariffs could reduce the economic benefits of the Phase One deal by limiting China’s access to its second-largest trading market.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a surprise crude oil inventory build of 1.1 million barrels for the week-ending January 10. Analysts were looking for a 474,000-barrel draw in inventory.

The API also reported another build of 3.2 million barrels of gasoline for the week-ending January 10 after last week’s large 6.7-million-barrel build. Analysts were predicting a 3.386-million barrel build for the week.

Distillates also saw inventories increase by 6.8 million barrels for the week. Cushing inventories saw no change.


Daily Forecast

Look for the U.S. Energy Information Administration’s weekly inventories report to set the tone on Wednesday. Due to be released at 15:30 GMT, it is expected to show an inventory build of 400,000 barrels.

A larger-than-expected build could send prices tumbling since traders are already agitated about the length of the U.S. tariffs and their potential impact on future demand growth.

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