Commodity Daily News

Unexpectedly Sharp Drop in Inventories Lifts Oil Price

US crude oil inventories revealed an unexpectedly steep decline of 2.3M barrels this week. Traders have begun to assess what impact this will have on price and what it may mean for global industry. The connection of US stockpiles to the price of crude oil is difficult to gauge, however. A decline could either represent a short-fall in supply or simply an expansion of usage from bolstered demand. Either way it tends to suggest an increase in price, which is what traders witnessed yesterday.

The other side of this equation, however, may be that the US decided to release more of its inventories to alleviate pressure at the pumps since US gas prices have climbed to nominal record highs over the past few weeks. No matter what the reason, this shortfall in stockpiles is helping to fuel a buy-in on crude oil's spot and futures market driving the price to an 8-day high. Traders may expect a corrective downturn if the USD finds support soon, otherwise it may be a safe bet to join the bullish trend.