Image credit: A/S Global Risk Management

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Oil prices dropped heavily on Wednesday as U.S. equity markets fell and data from the American Petroleum Institute (API) pointed to a huge build in U.S. crude oil inventories of almost 10 mio. barrels. The drop came in spite of the fear of shrinking supply from Iran as well as Hurricane Michael, which has closed nearly 40 percent of the oil output from the Gulf of Mexico.

This afternoon, the weekly oil inventory report from the Energy Information Administration (EIA) will be followed closely for confirmation/deviation from the API data. The report is one day delayed due to Monday's holiday. Consensus is a build of 2,6 mio. barrels of crude, small drops in distillates and gasoline inventories. With the API data so bearish, expect volatility around the publishing this afternoon (17.00 CET).

The sanctioning of Iran has for weeks been the main concern of market participants. Exports as well as production in Iran is falling, and the possibility - and extent - of waivers are considered limited.

On Tuesday, the IMF cut its global economic growth forecast for 2018 and 2019, which raised concerns for the demand for oil in the long term. Saudi Arabia is allegedly supplying Indian buyers with an additional 135 kbpd. barrels of crude oil through November.

Today, OPEC will release its monthly oil market report and the European Central Bank will publish the Account of Monetary Policy Meeting.

All in all, we are in for another volatile day in the oil market!