Yesterday oil prices dropped on fears that today’s inventory report from the U.S. Energy Information Administration would show a big increase in crude inventories.
Today oil prices are down further on the actual report: Crude inventories climbed by 2.28 million barrels to 525.9 million barrels for the week that ended on August 26. That’s the highest seasonal level for crude stockpiles in more than two decades. Analysts surveyed by Bloomberg before the release of the report were looking for an increase in inventories of 1.3 million barrels.
As of the close today, August 31, U.S. benchmark West Texas Intermediate was down 3.28% to $44.83 a barrel. In the most recent rally oil prices peaked at $48.52 on August 19. Today the Brent international benchmark was down 2.75% to $47.04.
Comments from Schlumberger (SLB), the world’s largest oil service company, didn’t help the oil market’s mood this morning: The company expects the drilling market to get worse in the third quarter on a further decline in deep-water drilling activity.
In other anticipatory news, the private ADP employment report showed that companies added 177,000 workers in August. That was in line with economists’ expectations. The Department of Labor will report its figures on August employment on Friday, September 2. Investors and traders and economists are looking to Friday’s jobs numbers for clues on when the Federal Reserve will next raise interest rates. Odds of a rate increase at the Fed’s September meeting have climbed to 27% today from 24% yesterday, according to the CBOE Fed Watch indicator. Odds for a rate increase by the December meeting have now climbed to 58.6%.