Uncertainty Dominates Crude Oil Prices, Positive Inventory News Discounted

Although underlying sentiment surrounding the oil market has remained firm, prices have been unable to sustain their best levels with a paring of long positions.

Oil prices pushed higher in immediate reaction to the API inventories data with a larger than expected draw of 7.8 million barrels, although there was a quick retreat following the unexpected gasoline build.

There were no substantive comments following the meeting of OPEC and non-OPEC officials during Monday and Tuesday.

The dollar dipped lower against the yen, although the wider slide in risk appetite tended to put downward pressure on the energy complex on concerns that global growth conditions could be damaged.

There was support below the $49.00 p/b level with a rally to the $49.40 area ahead of the latest EIA inventory data with Brent trading close to $52.50.

The EIA data recorded a larger than expected draw of 6.45 million barrels in the latest week compared with consensus forecasts of a draw close to 2.5 million and there was a slight decline in crude production for the week.

Gasoline inventories increased, however, which dampened sentiment to some extent. Crude dipped lower on the data, although the main feature was again choppy trading conditions.

WTI traded around $49.30 p/b late in Europe with Brent around $52.40 p/b.

Markets were waiting for comments from Saudi Arabia on Thursday with some speculation over more aggressive action to support prices.

Volatility levels are liable to remain elevated in the short term with uncertainty surrounding crude amplified by wider gyrations across equity and bond markets. There is, however, the potential for further underlying selling interest on approach to the $50.00 p/b level in WTI.