Oil Extends Slump Below $80 A Barrel After US Stockpiles Swell
Crude is starting May on the back foot after a rocky April that saw it surge to the highest since October.
(Bloomberg) -- Oil extended declines as US crude inventories swelled to the highest since June and traders waited for the Federal Reserve’s policy decision.
West Texas Intermediate dropped below $80 a barrel and reached the lowest intraday price since mid-March. Prices also broke beneath the 200-day moving average, which had served as a support level for more than a month.
A report from the Energy Information Administration showed US crude stockpiles increased 7.27 million barrels last week, the biggest jump since early February and more than the 4.91 million-barrel gain projected by an industry group on Tuesday. That adds to headwinds that also include the prospect of a cease-fire that would reduce tensions in the Middle East. Crude last month surged to the highest since October following Iran’s unprecedented attack on Israel.
“The surprise build from the EIA caught most traders off guard,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. When combined with elevated interest rates from the Fed and accelerated liquidation after crude broke through moving averages, “the long side of crude is losing its luster.”
While OPEC+ supply curbs are also supporting prices, uncertainty over US monetary policy and softness in fuel markets including diesel are adding to headwinds. Economic data on Tuesday reinforced bets Fed officials will keep rates steady at a two-decade high. In another sign of bearishness, contracts are trading below their 50-day moving averages. A sustained break below those levels could spur further selling.
Wednesday also marks the Labor Day holiday in many countries, meaning trading volumes were thinner than usual.
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