Oil Back on the Retreat

Oil prices retreated on Tuesday following a bigger than anticipated build in US crude oil inventories last week reported by the American Petroleum Institute.  According to API, US crude stockpiles rose by 4.680 million barrels last week with storage at Cushing climbing by 632,000 during the same period, erasing more than half the drawdown experience over the summer months.  This contrasts sharply with an expected drawdown in the headline figure ahead of official data due from the US Department of Energy later in the session.  Furthermore, gasoline stockpiles rose by 4.905 million barrels last week, marking the biggest increase since January and highlighting the lingering potential for storage facilities to rapidly fill.  While market speculators have never been longer Brent crude oil according to figures reported by ICE last week, it could imply a sharp reversal lower in prices if EIA data corroborates the API figures.

In a sign that the weaker Pound is being felt throughout the economy, the latest consumer price inflation data shows that producers and importers are beginning to pass along rising costs to consumers.  Headline inflation figures reported during the month of November showed that prices for a basket of goods and services rose by 1.20% on an annualized basis, printing at the highest point since October 2014.  The main drivers of the latest inflation figures were transportation costs which rose by 2.50% alongside clothing and footwear which climbing 0.90% during the period.  The drags predominantly came from food and beverages.  The core inflation figure was also higher, printing at 1.40% and likely easing pressure on the Central Bank to accommodate monetary policy further over the coming months.  After closing slightly lower on Tuesday, GBPUSD is trending mostly flat on the session.