In a notable market development on Thursday, West Texas Intermediate (WTI) US Crude Oil marked a surge to $74.00 per barrel, buoyed by a more substantial decline in US Crude Oil supplies than initially anticipated. The Energy Information Administration (EIA) reported a noteworthy drawdown of 2.492 million barrels for the week ending January 12, surpassing market expectations and erasing the previous week’s buildup of 1.338 million barrels.
Simultaneously, geopolitical tensions intensified as Iran-backed Houthi rebels declared their intent to escalate attacks on civilian cargo ships traversing the Red Sea. This declaration followed an increase in naval strikes by the US-UK coalition on Houthi-controlled missile launch sites in Yemen.
Refinery demand has reached its peak, with petroleum refiners scrambling for additional Crude Oil despite a growing surplus in downstream oil products. The rising US Crude Oil production output, reaching new all-time highs, presents a potential constraint on upward momentum amid hypothetical supply concerns.
Barrel traders remain fixated on supply drawdowns and potential disruptions due to escalating geopolitical tensions. The recent surge in violent rhetoric from Houthi rebels has contributed to the rise in Crude Oil prices throughout the week, with concerns growing about the safety of energy supply lines between Europe and Asia.
Cold weather conditions have also impacted US oil production, with the EIA estimating a slight drawdown. Gasoline production averaged 9.4 million barrels per day for the week ended January 12, compared to the previous week’s 9.7 million bpd. Processed gasoline reserves increased by 3.1 million barrels, accompanied by a 2.4 million barrel buildup in middle distillates, adding to the previous week’s 6.5 million barrel supply increase.
Looking at the technical outlook for WTI, US Crude Oil has re-entered the upper range of recent congestion in the WTI chart, trading at $74.00 for the fourth time since the beginning of 2024, when it started near $72.00. Daily candlesticks indicate a prolonged consolidation zone in WTI, as it bids into familiar levels following a modest rebound after a 28% decline from September’s peak near $94.00 per barrel.
Having bottomed out near $68.00 in mid-December, WTI has maintained a sideways trend between $70.00 and $76.00 for seven consecutive weeks. The market remains watchful of both supply dynamics and geopolitical developments, which could further impact Crude Oil prices in the near term.