Crude oil prices plunged 5% yesterday after Saudi Arabia highlighted that OPEC+ countries were ready to pump more oil in order to meet any supply shortfalls due to sanctions on Iran. Despite traders have already heard similar hints from some exporters, the reaction was rather painful for the market. The relatively strong dollar and widespread risk-off tone have also played against prices.
As a result, Brent dived to early-September low of $75.65 and staged the largest daily decline since mid-July. On Wednesday, the barrel is making some timid recovery attempts but remains under pressure, despite the risk sentiment has improved somehow. The additional negative factor for the market is another surprisingly large build up in US crude oil inventories. API data showed that the stockpiles increased by nearly 10 million barrels last week.
Later in the day, the EIA will release its official data. Should the numbers similarly disappoint, and crude oil production rises after the recent decline in activity, Brent will struggle to recoup steep losses and could target even lower. In this scenario, the price may target the $75 handle if the $75.60 area gives up.