But resumption of Iran output could end the price rally, says one analyst: File Image/Pixabay
A profit taking that was said to be healthy for the crude market occurred on Wednesday, as more than expected inventory builds in the U.S. caused traders to send oil prices downwards.
Brent settled down $1.82 to $84.58 per barrel, while West Texas Intermediate settled down $1.99 to $82.66 per barrel.
According to the American Petroleum Institute, inventories rose 2.3 million barrels in the week ending October 22, more than expectations for a 1.9 million barrel gain.
Bob Yawger, director of energy futures, Mizuho
Storage at Cushing alone has the potential to...rally the market to the moon
Also, gasoline inventories rose by 500,000 barrels and distillate stocks increased by 1 million barrels, compared with expectations for both to drop.
Craig Erlam, senior market analyst at OANDA, remarked, "Barring more bullish headlines, which is possible considering what we saw yesterday, we could see some profit-taking in Brent and WTI, which would be healthy for the market."
Still, oil tanks at the Cushing, Oklahoma storage hub are more depleted than they have been in the last three years, and analysts expect the draw to continue in the short-term: "Storage at Cushing alone has the potential to really rally the market to the moon," said Bob Yawger, director of energy futures at Mizuho.
Mukesh Sahdev, senior vice president and head of downstream at Rystad Energy, added, "Only if OPEC [the Organization of the Petroleum Exporting Countries] intervenes with more supply of crude or if COVID rears its ugly head again, curbing demand, this high volatility will come off."
Wednesday's profit taking was not entirely due to the U.S. crude builds, however: it was said that traders were also swayed by Iran and the European Union agreeing to restart negotiations on a revival of the 2015 nuclear accord before the end of next month, which suggests that Iranian barrels could return to the global market if the talks – and subsequent Iran/U.S. negotiations - are successful.
Fawad Razaqzada, a market analyst with ThinkMarkets, said such a scenario could end the "threat of a supply shortage that has been partly the reason behind the big oil rally."