Why Is Crude Oil Trading Lower This Morning?
Early Morning Update: How Are Commodities on May 19?
Crude oil weakens on Thursday morning
Crude oil is trading lower on Thursday morning because of the build in crude oil inventories and the stronger dollar. At 6:31 AM EST, West Texas Intermediate crude oil for June delivery was trading at $47.25 per barrel—a drop of 1.9%. Brent crude was trading at $47.83—a fall of 2.3%.
Unexpected build in crude inventories
According to data released by the U.S. Energy Information Administration on Wednesday, US crude oil inventories rose 1.3 MMbbls (million barrels) in the week ending on May 13. On Tuesday, the American Petroleum Institute reported a decline of 1.14 MMbbls in the inventory. This disappointed the Market. It was expecting a draw of 2.8 MMbbls from the inventory. This report was a break for the crude oil rally. It was supported by multiple supply disruptions in the Market. Read What’s Moving Crude Oil Prices on Tuesday Morning? to learn more about supply disruptions.
Stronger dollar weighs on crude oil
In addition to the inventory build, the stronger dollar is also keeping pressure on crude oil prices on Thursday morning. The dollar gained strength after the hawkish FOMC (Federal Open Market Committee) meeting minutes on Wednesday. This is weighing on oil prices. The outcome of Wednesday’s FOMC meeting increased the chances of an interest rate hike at the June meeting. According to data released on Wednesday, Iran’s oil exports were growing faster than expected. Iran’s oil exports for May are estimated to be 2.1 million barrels per day. This is 60% more than the exports a year ago.
On Wednesday, crude oil producers Carrizo Oil & Gas (CRZO), Canadian Natural Resources (CNQ), British Petroleum (BP), and Total S.A. (TOT) fell 4.4%, 0.76%, 0.28%, and 1.5%. The SPDR S&P Oil & Gas Exploration and Production ETF (XOP) fell 1.4% on May 18.
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