The price of oil dropped on October 27, 2021, after industry data proved that crude oil stockpiles in the United States surged more than expected. Also, the drop is thought to have been caused by an unexpected fuel inventories increase in the past week in the biggest oil consumer in the world.
Brent oil futures lost 94 cents, which translates to 1.1%, to trade at $85.46 per barrel by 0654 GMT after closing at the highest level in seven years on October 26. West Texas Intermediate (WTI) futures lost $1.02, nearly 1.2%, to trade at $83.63 per barrel after gaining 1.1% in the past session.
Crude oil inventories surged by 2.3 million barrels in the week ending October 22, according to market data that cited American Petroleum Institute figures. That figure was more than the expectations for a 1.9 million barrel gain.
The gasoline inventories increased by 500,000 barrels and distillate stocks increased by around 1 million barrels when compared to a forecast for both to plunge. With Brent soaring in the last eight weeks and WTI climbing for the last 10 weeks, the prices are starting to appear overbought, according to the analysts.
One senior market analyst at OANDA, Craig Erlam, said:
“Barring more bullish headlines, which is possible considering what we saw yesterday, we could see some profit-taking in Brent and WTI which would be healthy for the market.”
Notably, the storage tanks located at the Cushing, Oklahoma, delivery hub that operates for WTI oil have now been depleted more than they have been in the past three years. Also, the prices of longer-dated futures contracts point to supplies remaining at those levels for several months to come.
Nonetheless, a shaky recovery globally from the worst health crisis in a century, after the pandemic affected demand for many months. That scenario has mostly resulted in doubts over the sustainability of the oil prices. One Singapore-based energy trader, while referring to Brent’s gains, said:
“Yesterday’s session was notable as we broke through the high seen in 2018 before a sharp sell-off occurred.”
The sell-off in 2018 came after worries about a dwindling supply resulted in fears of a glut. This trader concluded:
“Will history repeat itself or will we keep seeing prices move higher.”