- Weekly EIA report shows a larger-than-expected build in crude stocks.
- Broad-based USD strength weighs on WTI as well.
- Hurricane Michael hurts crude oil production in the Gulf of Mexico.
After recording modest recovery gains in the past three trading days, crude oil lost its traction on Wednesday with the barrel of West Texas Intermediate falling below the critical $70 mark to settle 3% lower at $69.75. As of writing, the WTI was down $2.3 in post-settlement trade at $69.82.
Earlier today, the weekly report published by the U.S. Energy Information Administration revealed that crude oil stocks rose by 6.5 million barrels in the week ending October 12 compared with analysts' expectation for a draw of 280K barrels. Although further details of the publication showed that the crude production declined by 300,000 bpd to 10.9 million bpd in the same period, markets largely ignored this reading as it was seen as the result of the Hurricane Michael's negative impact on the production in the Gulf of Mexico.
Commenting on the report, "A tick higher in refining activity and a drop in production due to hurricane activity in the Gulf was not enough to halt a fourth consecutive climb in stocks - and a solid one at that," Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky, told Reuters.
On the other hand, a broadly stronger greenback didn't allow the WTI to make a meaningful recovery. Boosted by the hawkish tone seen in the FOMC meeting minutes, the US Dollar Index rose to its highest level in a week at 95.62 in the last hour.
Technical outlook by FXStreet Chief Analyst Valeria Bednarik
WTI gained bearish traction in the daily chart, as it settled below its 100 DMA for the first time since September with technical indicators heading sharply lower within negative levels. In the 4 hours chart, the commodity broke below its 20 and 200 SMA, both converging at around 71.50, while technical indicators turned directionless at their daily lows, rather reflecting the decreased trade volume at this time of the day than decreasing selling interest.
Support levels: 69.40 - 68.80 - 68.15.
Resistance levels: 70.45 - 70.90 - 71.50.
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