Oil pulls back from highs after data showing US inventory buildup
Global oil prices fell on Wednesday, September 16, after a two-day rally that pushed Brent to its highest levels in recent months. The new pressure factor was data showing a sharp increase in U.S. oil inventories, while risks of supply disruptions from Saudi Arabia and Libya continue to support prices.
Reported by Bloomberg.
Brent moved down toward $108 a barrel after gaining about 4% over the previous two sessions. U.S. WTI is trading near $105 a barrel.
During the earlier rally, the market reacted primarily to supply problems. Saudi Arabia halted the strategic East-West pipeline, and in Libya there were disruptions at several facilities.
However, after the rapid rise in prices, some traders began to take profits. Bloomberg notes that the 14-day relative strength index for Brent exceeded the 70 level. In the market, this indicator is usually seen as a signal that the asset may have risen too quickly and has become technically overbought.
U.S. oil inventories unexpectedly increased
An additional reason for the decline was preliminary data from the American Petroleum Institute (API). Over the week, U.S. crude inventories increased by 7.1 million barrels.
At the same time, inventories of main petroleum products rose: gasoline by about 1.5 million barrels and distillates by 1.6 million barrels.
The increase in inventories may indicate that on the U.S. market, supply in the short term exceeds demand. The full picture will come from official data from the U.S. Energy Information Administration (EIA), which are expected later on September 16.
Meanwhile, the potential for sharp price declines remains limited by supply problems in the Middle East. The Wall Street Journal notes that the shutdown of the Saudi East-West Pipeline removed one of the most important routes that allows bypassing the Strait of Hormuz.
The pipeline's maximum throughput is about 7 million barrels per day. According to estimates cited by WSJ, full repair of the damaged infrastructure may take six to eight weeks, although partial restoration is possible sooner.
Another factor remains problems in Libya, where operations at three oil facilities were suspended due to the security situation.
Thus, the current decline appears primarily as a correction after the rapid two-day gain. The market simultaneously received two contradictory signals: rising U.S. inventories put pressure on prices, while supply disruptions keep a significant geopolitical risk premium.
Based on: Bloomberg, The Wall Street Journal
