EIA lowered its demand, and fear of recession increased
Like every Tuesday and Wednesday, we had API and EIA weekly inventory reports. According to Tuesday's American Petroleum Institute report, the levels of US crude oil inventories fell by -6.426M barrels, almost twice more than -3.884M of expectations, but less than -7.850M barrels of the week earlier. We could see the same reduction in the weekly change in the number of barrels of commercial crude oil held by US firms in the Energy Information Administration (EIA) report. According to the EIA report, Crude Oil Inventories fell by -5.187M barrels, also twice more than the -3.305M barrels forecasts. However, investors are ignoring these numbers, while usually sharp fall of inventories must increase the prices.
The main reason for this waiver could be pessimistic about global economic growth. We can see the impact of lower expectations for economic growth in the short-term energy outlook report published on Tuesday, December 6. EIA lowered its forecast for crude oil demand growth this year to 470,000 barrels per day in its previous short-term energy outlook report from 490,000 barrels per day. The organization's pessimistic expectations and concerns about the Fed's interest rate hikes triggered a sharp sell-off in the oil market. On Wednesday, December 7, WTI price lost almost 0.4%, and Brent oil is trading by 0.2% lower in the middle of the North American season.
While WTI has been losing about 10% since the beginning of the week, from the technical point of view, it moves in a clear downtrend. The critical pivot, currently sitting at $76 and trading under this level, can open the doors for much lower levels.
