Oil prices fell lower on Wednesday after a report showed that crude inventories rose for the tenth consecutive week. West Texas Intermediate Crude for January delivery was the most actively traded contract on the New York Mercantile Exchange, falling to $92.30 per barrel, marking the lowest level for the most actively traded contract since May 31. For the day, the contracts were off by $1.38, or 1.5 percent.
The U.S. Energy Information Administration said that crude supplies increased by 3 million barrels during the week ended November 22. The report caught economists off guard, with expectations that stockpiles would decline by 1.5 million barrels.
The EIA report follows the less-watched report from the American Petroleum Institute on Tuesday showing a rise of 6.9 million barrels for the week.
January contracts are down by 2.7 percent in three trading days this week. The markets will be closed tomorrow for Thanksgiving and only open until 1 PM ET on Friday.
Also weighing on crude prices lately has been a preliminary deal struck between six world leaders and Iran regarding its nuclear initiatives. In the deal, Tehran’s nuclear program will be curbed in exchange for some sanction relief that has gashed Iran’s oil exports from 2.5 million barrels each day to less than 1 million barrels per day. The pact is not finalized, but concerns have been raised that future deals will be made that will allow Iran to add substantial amounts of oil to the market, ultimately driving oil prices even lower. The Islamic Republic currently hosts about 9 percent of the world’s proven oil reserves.
The temporary agreement is still not finalized and it only is paving the way for a more comprehensive deal targeted for about six months down the road. The deals could go through, it would likely further weigh on oil prices, but this isn’t the first time that the West and Iran have gotten close to an agreement on nuclear efforts only to have the negotiations abruptly end without a deal. In that case, oil may see a rapid spike upward.
Right now, oil has taken a bearish position since running upward in August on turmoil in the Middle East as the markets prepared for the U.S. to be leading a strike on Syria after it used chemical weapons on its own civilians. Mushrooming inventories couldn’t be coming at a worse time for oil bulls as investors lean towards the idea of a deal being reached to quell any stormy waters.
However, a soft inventory report, economic data remaining strong and any hint of negotiations unraveling in Iran and oil will probably deliver a nice bounce.