Unexpectedly Large Crude Oil Build Triggers Sell-off

November Crude Oil futures reversed to the downside after crude oil inventories rose more than expected according to a government report. This came after several days of strength, triggered by reports of a tightening supply/demand situation.

The Energy Information Administration said on Wednesday that U.S. crude inventories rose by 3.1 million barrels in the week-ended October 2. Analysts and traders were pricing in an increase of only 2.2 million barrels.

Refinery crude oil runs fell by 403,000 barrels per day, EIA data showed. Refinery utilization rates fell by 2.3 percentage points.

The EIA also reported in its monthly report that global oil demand should increase by its fastest rate in six years in 2016, suggesting a surplus of crude is easing more quickly than expected.

The market rallied earlier today because investors were banking on a drawdown as suggested by Tuesday’s preliminary inventory data by the American Petroleum Institute suggested a decline of 1.2 million barrels.

The report is bearish enough to put an end to the current rally. Overall, traders feel it is going to be a battle to get through the psychological $50.00 level. This week’s oil and products reports suggest that over the short-run, inventories are increasing more than expected even with refinery utilization dropping for seasonal maintenance.

December Comex Gold futures traded lower on Wednesday after the U.S. Dollar firmed. Losses were softened on expectations the U.S. central bank will delay raising rates until 2016.

The EUR/USD weakened on Wednesday after German Industrial Production fell unexpectedly. Traders were pricing in a reading of 0.3%. The report showed a 1.2% decline.

Short-covering and position-squaring ahead of Thursday’s Bank of England monetary policy meeting and a stronger-than-expected U.K. Manufacturing Production report helped drive the GBP/USD sharply higher. The report showed a gain of 0.5% versus the estimate of 0.4%. U.K. Industrial Production was up 1.0% versus an estimate of 0.3%.