WTI slides back towards daily lows under $47.00 amid unexpected inventory build plus defensive market tone

• WTI crude oil has been on the defensive on Tuesday amid continued Covid-19 concerns.
• A larger than expected build in weekly private inventories has exacerbated the selling pressure.

WTI crude oil futures have been on the back foot in recent trade, with the front-month contract dropping to fresh US session lows in the $46.70s in recent trade after a surprise build in private weekly API crude oil inventories. Markets expected private inventory data to show crude stocks dropping by 3.25M barrels, in a reversal on the huge more than 15M build in inventories seen last week. Instead, inventories again rose, this time by 2.7M barrels, indicative of weaker demand over the past week.

To the downside, lows of the day set prior to the EU open around $46.60 will be the most immediate area of support to watch out for. At present, WTI trades with daily losses of just over $1.0 or nearly 2.5%.

Crude oil markets on the defensive

Crude oil markets have been on the defensive throughout the day on Tuesday. Traders cite continued concerns regarding the impact of Covid-19 news coming out of Europe (new mutant strain spreading in the UK that spreads faster, increasing the risk of lockdowns and having already resulted in travel bans, all negatively impacting fuel demand). A broad pickup in USD as a result of the above noted negative Covid-19 news but exacerbated by continued Brexit angst is also weighing on the price action; note that crude oil has a negative correlation to the dollar.