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Oil prices pummeled by unexpected inventory build

The downtrend on the oil market, which appeared to have run out of steam, picked up momentum again on Wednesday, August 4. As a result, Brent sank 3%, breaking through several support levels and dropping below the psychologically important $70/bbl mark to $69.99/bbl, while WTI, after breaching a number of support levels, plunged 3.4% to $67.72/bbl.

The key downside driver was likely US crude oil inventories, which caught analysts off guard. Despite the median forecast that called for a drawdown of 3.63 mln bbl, stockpiles unexpectedly increased by almost the same amount as the anticipated draw (+3.1 mln bbl). In addition, news about the spread of new Covid variants strains, alongside downbeat reports that China is closing its borders to a number of countries, triggered a surge in negativity.

Oil prices are attempting to muster a rebound this morning. By the time of writing, Brent is trading slightly higher, up 0.14%, slightly above $70/bbl, while WTI is 0.16% in the green, but still below $68/bbl. Our Brent price forecast for today is in the range of $69.8-70.5/bbl.

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