WTI drops toward $68 after API report shows a surprise build in US crude stocks

• Crude inventories in the U.S. rose by 5.6 million barrels.
• In July, OPEC output hits the highest level of 2018.
• EIA report shows a 1.6% increase in oil demand in the U.S. in May.

Crude oil prices came under a sudden selling pressure in the late NA session after the API reported a sharp increase in crude inventories and the barrel of West Texas Intermediate dropped to a fresh weekly low at $68.10 in the post-settlement trade. As of writing, WTI was trading at $68.33, losing 2.45% in the day.

In its weekly publication,  the American Petroleum Institute announced that crude inventories increased by 5.6 million barrels in the week ending July 27 to 413.2 million, to surpass the analysts’ estimate of a draw of 2.8 million barrels. The API also said that the U.S. crude imports rose last week by 591,000 barrels per day.

Earlier today, a Reuters survey showed that OPEC ramped up its output by 70,000 barrels per day in July to bring the total production to its highest level of the year at 32.64 million bpd  to bring back the supply concerns. On the other hand, the EIA’s latest monthly supply report highlighted that the total oil demand in the U.S. in May rose 1.6% on a yearly basis, which provided a short-term support to WTI ahead of the API data.

Markets now will be waiting for tomorrow’s EIA report. A similar positive number from the EIA could continue to weigh on crude oil.

Technical levels to consider

The initial support aligns at $67 (Jul. 17/18 low) followed by $65.90 (May 28/29 low) and $64.55 (Jun. 4 low). On the upside, resistances could be seen at $68.90 (60-DMA), $70 (psychological level) and $70.85 (Jul. 16 high).