Oil Slips From 7-Year High as Report Signals Rising Stockpiles

Elizabeth Low
·2 min read

(Bloomberg) -- Oil slipped from the highest level in seven years after an industry report pointed to another increase in U.S. crude stockpiles.

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Futures in New York traded below $83 a barrel after climbing more than 3% over the past four sessions. The American Petroleum Institute reported crude inventories rose by 3.29 million barrels last week, according to people familiar with the figures. That would be a fourth weekly expansion if confirmed by official government data later Wednesday.

At least one technical indicator is also signaling oil is due for a pullback. West Texas Intermediate’s 14-day Relative Strength Index is above 70, a level that signals crude is overbought.

Oil has rallied to the highest level since 2014 as an energy crunch coincided with rebounding demand from economies recovering from the pandemic. Russia is signaling that it won’t go out of its way to offer Europe extra natural gas to ease the current crisis unless it gets regulatory approval to start shipments through the controversial Nord Stream 2 pipeline.

“A spillover from the gas market is still moving the oil market more than its fundamentals,” said Suvro Sarkar, an energy analyst at DBS Bank. Oil prices are likely to remain strong amid tight supplies during winter, he added

In exchange for upping natural gas supplies, Russia wants to get German and European Union approval to begin using Nord Stream 2, according to people close to state-run Gazprom and the Kremlin. As if to underline the point, the pipeline’s operator said Monday its first line is full of so-called technical gas and ready to begin operation, though it can’t ship it until approval is granted.

See also: Here’s How Asian Refiners Are Ramping Up as Energy Crisis Hits

U.S. gasoline and distillate stockpiles -- a category that includes diesel -- both declined last week, the API said. The median estimate in a Bloomberg survey forecast the Energy Information Administration will report nationwide crude inventories increased by 2 million barrels.

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