High Inventories Push Current Crude Oil Prices to a New 7-Month Low

Crude oil prices recently fell to a new low in seven months after the supplies of the United States sharply increased in the past week to levels unseen in almost 22 years.

The higher supply, together with the discouraging data of the U.S. economy as well as the worsening Spanish debt problem, have oil prices on the road to their largest single-month percentage drop in over three years.

According to the data of the U.S. Energy Information Administration, crude oil stocks of the United States, without the inclusion of strategic supplies, moved to a higher than expected level in the past week to reach its highest amount since the month of July 1990. That is the factor that hastened selling for the day.

Current crude oil prices were already faced with pressure following separate reports showing that the jobless claims of the United States rose in the previous week. Moreover, the report also showed that the economic growth of the country for quarter one was weaker compared to the past report, and its corporate revenues also fell.

Markets were also affected by the crisis in the euro zone, with particular focus on the debt troubles of Spain. That sent the euro to a new 23 month-low versus the dollar. Moreover, it led traders to offload assets that are riskier, such as equities and oil.

The ICE Brent crude oil price for delivery in July dropped to its lowest rate of $101.2 during the session. That is a $2.20 drop and the lowest price within one trading day since the fifth of October 2011. On the same day, it traded at a price of $101.79, a drop of $1.68 which is the largest loss since the year 2008 after declining by 3% a couple of days ago.

WTI crude oil price for delivery in July fell by $1.96 to reach its $85.86. That is the lowest front-month price for U.S. crude since the 20th of October. Later during the day, it traded lower by $1.40 at $86.40. The front month price of U.S. crude is on its way to reaching its largest decline in one month since the year 2008.

By: Chris Termeer