Crude Oil (USO) Hit by Perfect Storm of Negative Data

June 21, 2012 7:11 AM EDT
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United States Oil Fund LP ETF (NYSE: USO) is getting slammed again this morning as WTI futures break below $81 per barrel. Crude oil prices and USO are getting hit by a triple threat from slowing growth, building inventory, and higher OPEC output.

Flash PMI data out of China yesterday showed weakening. The PMI index registered growth of 48.1, below last months reading of 48.4 and significantly lower than a healthy reading above 50. Euro area PMI also showed slow growth, registering a reading go 46.0.

Weekly crude oil inventory data in the U.S. helped to undermine USO. Traders yesterday were surprised to learn that inventory in the U.S. increased by 2.86 million barrels last week. Forecasts called for a 1 million barrel decline. Meanwhile, OPEC production levels remain high and key member state, Saudi Arabia, is comfortable with OPEC's high level of output.

The combination of weakening growth and higher inventory and production is creating a perfect storm of negative sentiment. United States Oil ETF is lower by over 13 percent in the past 30 days and may test lower again today as WTI searches for a bottom.

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