Oil Prices Tumble on Surprise Inventory Build; Market Eyes Supply Glut

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U.S. crude oil prices fell sharply on Thursday, retreating more than $1 per barrel, as a larger-than-expected inventory build raised fresh alarms about a potential oversupply in the market. West Texas Intermediate (WTI) crude for July delivery dropped 1.6%, settling at $77.20, after data showed domestic stockpiles rising for a second consecutive week.

The Energy Information Administration (EIA) reported an unexpected 3.2 million barrel increase in U.S. crude inventories last week, catching market participants off guard. Analysts had widely anticipated a modest drawdown, especially amid recent supply constraints and strong export demand. Instead, the build pointed to waning domestic consumption and possibly slower refinery activity.

The data immediately weighed on market sentiment, reigniting fears that the global oil market may once again tip into surplus territory. Traders and analysts alike have grown increasingly sensitive to inventory fluctuations, especially in a fragile demand environment shaped by uneven economic recovery and tightening financial conditions.

“The market had been balancing on a thin rope between supply discipline and sluggish demand,” said one commodities strategist. “This report tilts that balance toward oversupply risk, especially if inventories continue to climb into the summer.”

The decline in prices also comes as broader risk sentiment softens. Lingering uncertainty over global economic growth—particularly in China and parts of Europe—is capping enthusiasm for oil and other cyclical assets. At the same time, a firmer U.S. dollar is exerting downward pressure on crude, making dollar-denominated commodities more expensive for foreign buyers.

OPEC+ output discipline continues to provide a floor for prices, but rising U.S. production and mixed economic signals are creating friction in the broader price outlook. With shale producers showing signs of renewed drilling activity, some analysts warn that domestic supply may outpace demand growth in the coming months.

Technical indicators suggest WTI may test support near $76.50 if bearish momentum persists. On the upside, resistance is seen around $79.00, a level that has capped recent rallies.

Looking ahead, markets will be closely watching upcoming comments from OPEC+ officials, as well as economic data releases from key demand centers. For now, oil traders are recalibrating their expectations amid a shifting narrative—one that increasingly highlights the risk of too much supply and not enough demand.

 

 

 

 

 

 

 

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