Advertisements

API Reports Rise in U.S. Crude Stocks; Market Awaits EIA Insight

by Krystal

Light crude oil futures experienced a slight pullback on Wednesday, reversing some of the gains made on Tuesday, when prices rose by 2.43%. The market is currently holding above the crucial 50-day moving average of $70.61, which is providing immediate support.

However, futures are encountering resistance at the 50% long-term retracement level of $71.63, a barrier that has proven challenging to surpass. A significant move above this level could lead to further increases, potentially pushing prices toward the 200-day moving average of $72.97, another key resistance point. Traders are closely monitoring U.S. government oil inventory data, set to be released later today, as it could bring new volatility to the market.

Advertisements

As of 10:29 GMT, Light Crude Oil futures are trading at $70.73, down $1.01 or 1.41%.

Advertisements

Inventory Data Impacts Prices

Wednesday’s slight price decline followed a report from the American Petroleum Institute (API) indicating that U.S. crude inventories rose by 1.64 million barrels last week. This increase was much higher than the 300,000-barrel rise analysts had expected. The unexpected jump in crude stocks has put pressure on prices, especially since traders had anticipated only a minor increase.

Advertisements

The upcoming Energy Information Administration (EIA) report, due at 14:30 GMT, will be crucial for determining market direction. Analysts forecast an additional 900,000-barrel increase in U.S. oil supplies. If this figure exceeds expectations, it could lead to renewed selling pressure amid growing concerns about oversupply in the U.S. market.

Advertisements

Middle East Tensions Support Prices

Despite the negative inventory data, ongoing tensions in the Middle East continue to support oil prices. The conflict, particularly between Israel and Iran, has kept traders on alert, driving demand for crude as a safeguard against supply disruptions. Tuesday’s price increases were likely influenced by the lack of resolution following U.S. Secretary of State Antony Blinken’s visit to Israel, where he engaged in extensive discussions with Prime Minister Benjamin Netanyahu and other senior officials.

While no significant breakthroughs were reported, the potential for a prolonged conflict remains a key factor in the oil market. Analysts from ING suggest that traders are factoring in the likelihood of extended unrest, with no immediate resolution in sight. The recent confirmation of the death of Hezbollah leader Hashem Safieddine, targeted in an attack, has further heightened concerns about escalating violence in the region.

Market Outlook: Bearish Sentiment with Anticipated Volatility

The near-term outlook for crude oil prices appears bearish, especially if the EIA report confirms a larger-than-expected inventory increase. If prices fail to remain above the 50-day moving average, a decline toward the next support level of $69.21 is possible, with a minor bottom at $68.17 offering additional downside protection.

Conversely, if prices manage to break through the 50% retracement level at $71.63, a push toward the 200-day moving average at $72.97 could occur, driven by fears of disruptions in Middle East supply.

In summary, crude oil traders should brace for increased volatility, as inventory data and geopolitical developments are poised to influence price movements. A sustained rise in U.S. stockpiles could drive oil prices lower, while any escalation in Middle East tensions would likely provide significant support.

Related Topics:

Advertisements
Advertisements

You may also like

oftrb logo

Oftrb.com is a comprehensive energy portal, the main columns include crude oil prices, energy categories, EIA, OPEC, crude oil news, basic knowledge of crude oil, etc.

【Contact us: [email protected]

© 2023 Copyright oftrb.com – Crude Oil Market Quotes, Price Chart live & News [[email protected]]