Oil traded lower yesterday morning following the release of the Department of Energy Crude Oil Inventory report. While traders were expecting a decline of over 500 barrels, inventories actually increased by 1,138 barrels.
In the chart below, we highlight the relationship between inventory levels this year versus the average since 1984. After spending much of the year above average, inventories saw a sharp decline throughout the Summer and into September, bringing levels back inline with their historical average. Over that time, the price of oil rose sharply as traders feared the trend would continue and take inventory levels below average.
However, builds in inventories over the last two weeks have caused fears of scarce oil to abate, and the price of oil is now showing signs of leveling off.