Despite Supply Build Middle East Fears Keep Crude Bears Sidelined (USO) (OIL) (UCO)

October 17, 2012 10:43 AM EDT
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WTI Crude oil futures traded slightly higher early on Wednesday, ahead of EIA inventory data. The EIA weekly inventory report, released at 10:30 ET, showed weekly inventories gained 2.6 million barrels vs. expectations of a gain of 1.5 million barrels. Yesterday's report by the American Petroleum institute showed U.S. crude inventories rose 3.7 million barrels.

Taken as a whole, the inventory build shows oil markets continue to remain well supplied and this could point to more downside for WTI, which currently trades near $92.50 per barrel, $4.50 off recent lows at near $88.

Oil was a major feature in yesterday's presidential debate, as both candidates argued in favor of domestic oil and gas production as a way to help create jobs in the U.S.

Meanwhile, fears about frayed tensions in the Middle East took a breather early this week, as traders focused on supply. However this trend could reverse if International mediator Lakhdar Brahimi is correct in his assertion that the Syria's civil war risked spreading across borders into an "all-consuming" conflict. These sorts of comments send chills down the spins of oil bears, and many are reluctant to short oil, though the fundamental supply and demand dynamics may point in that direction.

United States Oil ETF (NYSE: USO) and iPath S&P GSCI Crude Oil Total Return ETN (NYSE: OIL) are trading flat following the release of EIA inventory data.

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