Commodities: Shock US oil inventories send crude spiralling lower

Crude-oil futures were firmly under the hammer late on Wednesday as successive US inventory data shocked the market, casting a depressing pall over UK and US equities markets.

At about 16:06 BST, Nymex-traded West Texas Intermediate crude was down 2.87% to $46.72 a barrel, while Intercontinental Exchange-quoted Brent fell 2.04% to $48.94 a barrel.

"Crude prices took a knock today as the US posted its fourth inventories build-up in five weeks," said IG market analyst Josh Mahony in a note.

This afternoon, the US Energy Information Administration said crude inventories rose a forecast-busting 2.5m barrels in the week to Aug. 19. This after American Petroleum Institute yesterday reported an unexpected 4.464m barrel increase in US crude oil inventories last week.

"Despite being in so-called driving season, the build-up of surplus oil means that domestic demand is not keeping up with supply," Mahony said. That meant supply had become increasingly reliant upon international imports as output fell.

CMC Markets UK's chief market analyst, Michael Hewson, noted that yesterday's late Iran-inspired rebound in crude ran into a wave of selling after the inventories build-up.

"The weakness in prices hasn’t been helped by a comment from the Iranian oil ministry that they may not make a decision on attending next month’s Algiers event until the day before," said Hewson.

"As far as signalling goes that doesn’t send a particularly strong message that they are particularly concerned about underpinning the oil price at this point in time."

A rising US dollar was also a factor in commodities' fortunes this afternoon. At about 16:06 BST, the dollar-spot index was up 0.34% to $94.864, around week highs.

At about 16:06 BST, Comex-quoted gold was down 1.12% to $1331.00 and ounce, with the platform pricing silver down 1.83% to $18.58 an ounce and copper lower 1.08% to $210.3 a pound.

London Metals Exchange's three-month price for copper was down, but those for aluminium, zinc and tin were ahead. The spot price for platinum was firmly lower, as was that for palladium.

"A rise in inventory in Asia warehouses along with increased supplies from Peru has kept copper prices under pressure, as prices trade near an eight week low," said CMC Markets UK's chief market analyst, Michael Hewson.

Meantime, Chicago Board of Trade (CBOT) corn was up 0.44% to $338.75 a bushel, while wheat rose 0.23% to $428.50 a bushel.

Intercontinental Exchange-traded coca added 0.69% to $3,062/MT, while cotton No.2 fell 0.61% to $68.02 a pound. Live cattle dropped 0.59% to $109.08 a pound.