On Wednesday, the price of Brent oil dropped due to the increase in U.S. crude and gasoline inventories. However, crude prices lingered near three-year highs.
Benchmark Brent futures fell 8 cents to $69.88 a barrel at 0930 GMT, after earlier this month hitting above $70 a barrel for first time since 2014. U.S. West Texas Intermediate (WTI) futures were up 16 cents at $64.63 a barrel.
On Tuesday, the American Petroleum Institute stated that crude inventories increased by 4.8 million barrels in the most recent week, compared to the prediction of a 1.6-million-barrel decline. Gasoline inventories increased as well
On Wednesday afternoon, the official U.S. government inventory data is due, and investors will focus on if the numbers verify a true increase.
“The market has rallied by 50 percent and a lot of investors have been involved for a long time,” said senior bank manager Ole Hansen. “At what level would we start to attract some nervousness on the downside?”.
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“We probably need to break below $60 on WTI to put the cat among the pigeons … It’s going to take more than just a stock-build today to change that equation” Hansen added.
Presently, money managers are holding more bullish positions in crude futures and options than ever, inspired by the diminishing global inventories due to the supply cuts by OPEC, Russia and allies. Yet, some traders are protecting themselves against a fall in prices. Data has indicated that open interest for Brent put options for a selling at $70, $69 and $68 per barrel has jumped since last week.
Sukrit Vijayakar, an energy consultancy, believes that the increase in the options to sell was a result of the large positions that have accumulated over the last few months. “We still have … nine long barrels for every short barrel, so a reversal should be interesting to watch,” he said.
Most traders have concluded that it is doubt that oil prices will reduce much since the markets are supported by strong global economic growth not only increasing demand and output curbs by the Organization of the Petroleum Exporting Countries, Russia and others as well. The OPEC deal is currently slated to run through the end