Volatility has returned to the oil markets. After five straight days of gains, crude prices fell sharply Wednesday morning, breaking the longest winning streak of 2020.
U.S. benchmark WTI Crude hit a low of just over $12/barrel on April 28. Over the next five trading days, it soared more than 50% to reach an intraday high of nearly $26.50/barrel on Tuesday. The rally — the longest since July 2019 — reflected investor optimism that reopening global economies would drive fuel demand.
Wednesday morning, though, concerns about oversupply and lack of storage sent prices downward again to less than $23/barrel. The losses stopped when data from the U.S. Energy Information Administration (EIA) showed a smaller-than-expected build in crude inventories over the past week.
Image source: Getty Images.
Global benchmark Brent Crude, which is currently trading at higher prices than WTI Crude, experienced the same pattern: it closed at $22.74/barrel on April 28, and hit an intraday high of more than $32/barrel on May 5, before tumbling to $29/barrel Wednesday morning.
Where to put it
The rally was stopped in its tracks by a Tuesday afternoon report from the American Petroleum Institute (API), which estimated a crude oil inventory build of 8.4 million barrels for the week ending May 1. Prices continued falling until the EIA’s data, released Wednesday morning, estimated a much lower build of just 4.6 million barrels, which stopped the losses.
Both numbers were lower than the prior week’s build, which the EIA estimated at 9.0 million barrels and the API estimated at 10.0 million barrels, but oversupply remains a concern.
The falling oil prices dragged down oil stocks like ExxonMobil (NYSE: XOM) and ConocoPhillips (NYSE: COP). Shares of the two oil giants were down about 1.5% in morning trading.
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