Crude Lower as Bullish Inventory No Replacement for China Weakness (USO) (OIL) (UCO)

October 3, 2012 10:48 AM EDT
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United States Oil ETF (NYSE: USO) opened lower as WTI futures declined. The decline came despite API data released on Tuesday that showed oil inventories rose less than expected. The report showed an increase of 462,000 barrels compared to analyst expectations for a build of 1.5 million barrels. The widely followed EIA report this morning showed a decline 482,000 barrels.

After briefly touching $100 per barrel in September, WTI price have come under pressure as traders questioned the state of the global recovery As a result, trader have noted a shift in sentiment, with momentum heading south.

Chief concerns include ongoing weakness in Europe, along with lackluster U.S. economic data. Another concern for investors is China, which has seen a weakness. Overnight services data from the country show a non-manufacturing PMI reading of 53.7 for September, noticeably lower than the August reading of 56.3.

Going forward, a bullish bet on oil will likely key off China's stimulus effort, though many are now questioning the government's ability to orchestrate a prompt economic recovery.

As always, traders will be closely following developments in the Middle East.

Prior to the release of EIA data, WTI traded at $89.60 per barrel. Brent traded at $108.70.

iPath S&P GSCI Crude Oil ETN (NYSE: OIL) and United States Oil ETF (NYSE: USO) were lower by about 2 percent.

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