Crude Oil Weakens as Bearish API Report Encourages Profit-taking

Profit-takers helped drive crude oil prices lower on Wednesday as investors locked in gains following Tuesday’s unexpected 5 percent rally. The previous day’s strength was fueled partly by bullish forecasts from the U.S. government and OPEC that showed demand would increase next year.

Helping to put pressure on prices early Wednesday was trader reaction to an oil industry report that showed a surprise build in U.S. crude stocks. A stronger U.S. Dollar hurt demand because it made the dollar-denominated oil market more expensive to foreign buyers.

Early Wednesday, internationally-favored Brent futures fell 37 cents to $48.10 a barrel after settling $2.22, or 4.8 percent higher in the previous session. September WTI Crude Oil futures were $0.41 lower at $47.16, down 0.86%.

After posting its biggest daily gain since April 8, U.S. crude oil futures were under pressure early Wednesday after the American Petroleum Institute said late Tuesday that U.S. crude inventories rose by 2.2 million barrels in the week to July 8 to 523.1 million barrels, compared with analysts’ expectations for a decrease of 3 million barrels.

Yesterday’s API data may be making investors nervous ahead of Wednesday’s official U.S. stocks data. The U.S. Department of Energy’s Energy Information Administration (EIA) will release official weekly inventory data later on Wednesday at 1430 GMT. It is expected to show a 2.95 million barrel draw down, but this may change due to the results of the API report.

Late Tuesday, the EIA and OPEC sparked a portion of the rally with friendly demand outlooks. The EIA cut its U.S. and world oil demand growth forecast for this year, but it increased its demand growth estimates for 2017.

OPEC concurred with the EIA statement by saying demand for the producer group’s oil in 2017 would be higher than its current production.

Comments from Credit Suisse also underpinned prices with its 2016 oil price forecasts released earlier today. The bank predicted WTI would average $43.59 per barrel this year versus $36.91 in its earlier forecast, and $55.00 for 2017, up from an earlier estimate of $54.25.

In other energy related news, September Natural Gas futures were flat in early trading at $2.698, down $0.002 or -0.07% after hitting a three-week low on Tuesday. The market has been driven lower recently by forecasts for mild temperatures across key demand areas in the U.S.