The near $7 increase in West Texas Intermediate crude came to an end as futures fell off the highs at the latter part of the week due to an increase in inventories. According to the Energy Information Administration (EIA), inventories of gas and distillate fuels hit high levels with demand beginning to taper off. Distillate fuels increased by 4.54 million barrels
Gene McGillian, analyst at Tradition Energy, said “demand is weak and if we don’t see it become stronger, the market will come under pressure.” Crude consumption fell 7.1 percent since October 18, and gas consumption fell for the fifth consecutive report.
“The market’s just running out of gas and traders are pulling the plug. We started to see some technical selling,” said iitrader.com’s founder and head strategist Rich Ilczyszyn. The selloff in crude is also associated with the potential of a Federal Reserve taper at next week’s FOMC meeting. Risk assets has been on shaking ground in the last week.
Brent crude is also taking a break because inventories are going to increase. Libya, which has the largest oil reserves in Africa, will be reopening ports in Eastern Libya on December 15. The loss in steam is correlated to the increase production from Libya after a four-mouth stoppage.
There will be 600,000 barrels per day added from Libya’s top two ports, Es Sider and Ras Lanuf. Brent is the international standard for global oil outside the US, and OPEC’s production, including all 12 members, has fallen for a fourth straight month.
Jonathan Barratt, CEO of Barratt’s Bulletin, said “as markets look for the terminal point, tapering may damage the outlook for demand. Bulls and bears are at evens based on existing fundamentals.”