(Bloomberg) — Oil prices rose after government data showed a decline in U.S. stockpiles and suggested a tightening of the physical market.
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West Texas Intermediate settled near $79 a barrel as crude oil inventories fell by 1.36 million barrels, according to the Energy Information Administration. This pop indicates that traders are viewing this news as the first bullish indicator in a wave of bearish technicals.
In early trading, WTI fell to its lowest since mid-March. Crude oil prices have been on a downward trend since early April, posting losses in three of the past four weeks, and not only time spreads but also processing margins have declined. The decline comes as much of the geopolitical premium from tensions in the Middle East has dissipated and traders' focus has returned to cooler markets.
Estimates released Tuesday by the American Petroleum Institute predicted an increase in U.S. stockpiles, officials said.
“EIA's more reliable crude oil reserves are a counterbalance to the sharp rise in API, with some short sellers trading late yesterday and this morning,” said Dennis Kistler, senior vice president of trading at BOK Financial Securities. “We are trying to cover sold positions.”
A stronger dollar poses a further headwind for many investors as commodity prices rise. The U.S. currency is heading for a third straight day of gains, while oil prices below their 100-day moving average, compounding recent price declines, according to Bloomberg indicators.
The Organization of the Petroleum Exporting Countries is scheduled to meet next month to assess supply policy after implementing production cuts in the first half of this year to support prices. According to a Bloomberg survey, most traders expect restrictions to be extended, possibly through the end of the year.
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–With assistance from Sherry Su.
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