Investors who participate in crude oil trading should pay close attention to the recent news about the United States’ supply. According to Bloomberg, the supply surged, which brought West Texas Intermediate crude to a one-month low.
Crude stockpiles jumped 6.18 million barrels this past week, which was much higher than the estimate of 2 million by analysts surveyed by Bloomberg. This forced WTI to trade below $100 for a second day.
“The overall gain in crude stocks is pretty negative,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, told Bloomberg. “That’s a huge build. Crude will probably go down to $95 and find a bottom there.”
Rich Ilczyszyn, chief market strategist and founder of Litrader.com in Chicago, told Bloomberg that the larger than expected U.S. supply adds to the bearish thesis surrounding crude oil. He added that the market was “way overdone at $104.”
With a surging supply, the U.S. is planning its first sale from the reserve since 1990, according to Reuters. The Department of Energy is expected to sell up to 5 million barrels of crude oil from the Strategic Petroleum Reserve to test the capabilities of the nation’s emergency stockpile.
“Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred,” department spokesman Bill Gibbons said.
Investors will want to pay close attention to what the U.S. does with its oil supply, and if it continues to increase it will have an impact on crude prices moving forward.
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