Crude oil prices drop as US records a build in inventories

Written by: Faith Maina
December 23, 2020
  • WTI futures have dropped by 1.11% to $46.25 while the Brent futures declined by 0.16% to $49.29.
  • Trump has threatened to reject the $892 billion stimulus deal passed by Congress.
  • API has indicated a rise in crude oil inventories, at a time when the new COVID-19 strain may be in the US.

Crude oil prices dropped in Wednesday’s early trade as US recorded a rise in the commodity’s stockpiles. Trump’s tweet on his possible rejection of the stimulus deal has also impacted oil prices. The market is also reacting to the news on the new COVID-19 variant and the likelihood that it is already in the US. On a 4-hour chart, WTI futures were down 1.11% to trade at $46.25. Brent futures are also on a downward momentum, having declined by 0.16% to $49.29.   

crude oil prices

U.S. records a build in US crude oil inventories

On Wednesday, the American Petroleum Institute (API) released bearish data on stockpiles; pushing crude oil prices lower. Last week, oil inventories rose by 2.7 million barrels. The figure is a surprise to analysts who had predicted a drop of 3.25 million barrels.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Since mid-November, crude oil inventories have been rising beyond expectation. In the previous press release, API’s reading was 1.973 million barrels against the forecasted -3.5 million.

Later in the day, crude oil prices will respond to data from the Energy Information Administration on US inventories. In the previous week, the amount of oil in storage had reduced by 3.135 million barrels. This number was better than the expected -1.937 million barrels and the prior increase of15.189 million barrels.   

Tip: looking for an app to invest wisely? Trade safely by signing-up with our preferred choice, eToro: visit & create account

Travel restrictive measures impact crude oil prices

On Monday, the UK warned on a new COVID-19 variant. The new strain, which is said to be more infectious that the initial version of the disease, has led about 40 countries to ban travel to the region. Subsequently, restricted travels during the Christmas holidays have impacted crude oil prices.

What’s more, doctors in the US are warning that the variant could already be in the country. Speaking to CBSN, a New York City’s paediatrician, Dr. Dyan Hes said, “we have had people coming from the U.K. from the past few weeks, so why would this virus not jump on the place with everybody in their blood and in their respiratory secretions?”

President Trump threat on the stimulus deal

Crude oil prices are reacting to Trump’s reluctance to sign the US stimulus deal into law. In a video sent via Twitter, the president termed the package a “disgrace”. According to him, the deal constitutes hefty foreign spending while the $600 checks meant for individuals is low.

The $892 COVID-19 relief bill was passed on Monday after months of back and forth in the House. Granted, the amount is lower than expected. For full economic recovery, the United States needs a oost of. Still, investors who are interested in trading oil were ready to welcome a deal of lesser value.

Trump’s tweet has further dampened the positive market sentiment boosted by news of a possible Brexit trade deal. On late Tuesday, Robert Peston, a political editor at ITV tweeted, “A UK source now says agreement on a UK/EU trade deal is again possible tomorrow.” Prior to the news, the possibility of an accord prior to Christmas seemed unlikely.