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Oil Prices Slide as US Stockpiles Surge

by Krystal

On Wednesday, oil prices experienced a significant retreat, leaving traders concerned following a startling revelation from the American Petroleum Institute (API). The API disclosed a staggering 9.337 million-barrel increase in US stockpiles, a figure that cannot be overlooked. This surge indicates that the current production cuts enforced by OPEC may not be adequate to maintain stable price levels.

Natasha Kaneva, a commodity analyst at JP Morgan, weighed in, suggesting that Brent futures could soar to $100. This speculation emerged after Russia urged producers to limit their production to comply with OPEC+ agreements.

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Meanwhile, the US Dollar remains relatively steady, hovering above 104.00 according to the US Dollar Index (DXY). Traders are reinforcing defenses above this level in anticipation of upcoming economic data, including US Gross Domestic Product numbers and the Personal Consumption Expenditures (PCE) Price Index. Optimistic expectations surrounding the PCE release could fuel a rally in the US Dollar as investors reconsider the likelihood of interest rate cuts in 2024.

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At the time of reporting, Crude Oil (WTI) is trading at $80.88 per barrel, while Brent Oil is priced at $85.00 per barrel.

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Key Developments in the Oil Market

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The US API’s report revealed a surprising buildup of 9.337 million barrels, contrasting sharply with the previous week’s drawdown of 1.519 million barrels. Later today, at 14:30 GMT, the US Energy Information Administration is expected to release its own stockpile change data, with forecasts indicating a drawdown of 1.275 million barrels.

In other news, Bloomberg reports that Libya has appointed Khalifa Abdul Sadiq as interim oil minister, replacing Mohamed Oun. Oun was suspended pending an investigation into possible violations that compromised the rights of the Libyan State, circumvented laws, and misused public funds.

Looking ahead, the possibility of OPEC+ extending current production cuts until the end of 2024 could provide further upward momentum for oil prices.

Technical Analysis Highlights Potential Impact of US Production

The recent surge in US stockpiles has prompted a slight retreat in oil prices. This development undermines Russia’s efforts to boost prices by curbing its production ahead of the upcoming OPEC+ meeting. The decision now rests with OPEC, which may consider extending current production cuts.

For oil bulls, $86 emerges as the next significant resistance level, followed by $86.90, $89.64, and $93.98.

On the downside, support levels at $80.00 and $80.60 are crucial, with the 200-day Simple Moving Average (SMA) serving as a key level near $78.55 to mitigate downward pressure. Additionally, the 100-day and 55-day SMA’s at approximately $75.64 and $77.15, respectively, along with the pivotal level near $75.27, suggest limited downside potential and resilience against selling pressure.

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