Crude on the Ropes as Report Shows Surge in Inventory (USO) (OIL)

October 24, 2012 10:46 AM EDT
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Crude oil prices and the related ETF, USO (NYSE: USO), remained under pressure early on Wednesday. WTI slipping below $86.50 per barrel ahead of EIA weekly storage data that was expected to show gains of 1.8 million barrels. The report showed gains of 5.9 million barrels. American Petroleum Institute data on Tuesday showed crude stocks rose 313k barrels last week.

This week's decline in crude prices is tied to increasing fears about a global slowdown. The slowdown was reflected in the earnings reports of DuPont (NYSE: DD). Its third-quarter earnings report yesterday showed a 19 percent drop in chemical segment sales compared to last year, as volumes were pressured by softness in Europe and Asia Pacific primarily due to lower infrastructure spend and weak construction markets.

The declining crude oil prices are a slap in the face to crude bulls betting that ongoing tensions in the Gulf would lift prices. As the west and Iran face-off over its nuclear program, with the "red line" getting closer day-by-day, many had hoped speculation about tensions would be enough offset tends that show a well supplied oil market, but for now that doesn't appear to be the case.

A few bears, those brave enough to short oil, are already eyeing yearly lows near $77.

Prior to EIA data, United States Oil ETF (NYSE: USO) traded near 31.80. iPath S&P GSCI Crude Oil Total Return ETF (NYSE: OIL) traded near 20.75.

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