US West Texas Intermediate crude oil futures are trading almost flat on Friday, slightly lower shortly after New York opens as investors try to end a turbulent week with a marginal gain.
After hitting a multi-month high at the start of the week due to higher demand expectations, the market is struggling to get traders to profit and exit as crude oil inventories rise. US and a strong US dollar offset recent forecasts calling for supply shortfalls. .
The rise in US inventories last week came as production in the Gulf returned to near levels reached before Hurricane Ida hit about a month ago.
Meanwhile, an electricity crisis and concerns in the housing market in China, the world’s largest importer of crude and its second-largest consumer behind the United States, is putting pressure on sentiment and weighing on demand for oil. However, at the end of the week, the market reversed course on reports that China was ready to buy more oil and other energy supplies to help support its economic recovery.
Gains capped by unexpected rise in US crude inventories
API on Tuesday announced a surprise increase in crude oil inventories of 4.127 million barrels for the week ending September 24. Analysts expected a loss of 2.333 million barrels for the week.
The API also reported an increase in gasoline inventories of 3.555 million barrels for the same week. Stocks of distillates saw their stocks increase this week by 2.483 million …
US West Texas Intermediate crude oil futures are trading almost flat on Friday, slightly lower shortly after New York opens as investors try to end a turbulent week with a marginal gain.
After hitting a multi-month high at the start of the week due to higher demand expectations, the market is struggling to get traders to profit and exit as crude oil inventories rise. US and a strong US dollar offset recent forecasts calling for supply shortages. .
The rise in US inventories last week came as production in the Gulf returned to near levels reached before Hurricane Ida hit about a month ago.
Meanwhile, an electricity crisis and concerns in the housing market in China, the world’s largest importer of crude and its second-largest consumer behind the United States, is putting pressure on sentiment and weighing on demand for oil. However, at the end of the week, the market reversed course on reports that China was ready to buy more oil and other energy supplies to help support its economic recovery.
Gains capped by unexpected rise in US crude inventories
API on Tuesday announced a surprise increase in crude oil inventories of 4.127 million barrels for the week ending September 24. Analysts expected a loss of 2.333 million barrels for the week.
The API also reported an increase in gasoline inventories of 3.555 million barrels for the same week. Distillate inventories saw an increase in inventories this week of 2.483 million barrels for the week.
The U.S. Energy Information Administration (EIA) on Wednesday reported that U.S. inventories of crude oil, gasoline and distillate rose last week as production rebounded from recent storms.
Crude oil inventories rose 4.6 million barrels in the week of Sept. 24 to 418.5 million barrels, according to EIA data, compared to analysts’ expectations in a Reuters poll for a down 1.7 million barrels.
US gasoline inventories posted a modest gain of 193,000 barrels to 221.8 million barrels, compared to expectations of a rise of 1.4 million barrels.
Distillate inventories, which include diesel and fuel oil, rose 385,000 barrels during the week to 129.7 million barrels, from an expected drop of 1.6 million barrels.
US dollar volatility may have fueled bilateral crude trade
A bilateral swing in the US dollar may have encouraged crude short sellers to post profits after being weaker for most of the week.
Crude oil edged down throughout the week as the US dollar tested its highest level in a year. It saw a dramatic intraday reversal later in the day, however, after the greenback fell amid a rise in weekly jobless claims in the United States. Since crude oil is a commodity denominated in dollars, it tends to react to the volatility of the US dollar. A weaker dollar, for example, tends to lead to increased foreign demand for crude.
Chinese authorities hint at increased demand
Chinese Premier Li Keqiang said the world’s largest crude importer and second-largest consumer will secure its energy, electricity supply and keep economic operations within a reasonable range.
Traders interpreted this to mean that they would be willing to pay anything for enough crude and produce to support its economic recovery.
Li Keqiang probably made the comment because China has experienced an electricity crisis and housing market problems that have weighed on demand. In addition, activity at Chinese factories unexpectedly contracted in September due to more severe restrictions on electricity consumption and high input prices.
Weekly technical analysis
December Weekly WTI Crude Oil
Trend indicator analysis
The main trend is up according to the weekly swing chart. The uptrend was reaffirmed this week when buyers broke the previous high at $ 73.86. A trade at $ 61.11 will change the main downtrend. Exiting the major high at $ 76.98 will reaffirm the uptrend.
Analysis of the retracement level
The minor range is $ 61.11 to $ 76.26. The market is currently trading on the strong side of its retracement area at $ 68.69 to $ 66.90.
The short-term range is $ 55.54 to $ 76.26. His $ 65.00 retracement area to $ 63.46 is the best support area. This area controls the short-term direction of the market.
The main range is $ 37.70 to $ 76.26. If the main trend changes to the downside then its retracement area at $ 56.98 to $ 52.43 will become the main down target and value area.
Weekly technical forecasts
The direction of the WTI crude oil market from December to the week ending October 8 will be determined by the reaction of traders at $ 73.61.
Bullish scenario
A sustained move above $ 73.61 will indicate the presence of buyers. This could create the bullish momentum needed to challenge the main high at $ 76.98, followed by the psychological level of $ 80.00.
Bearish scenario
A sustained move below $ 73.61 will signal the presence of sellers. If this move generates enough bearish momentum, then expect the sell to eventually expand to the main support area between $ 66.90 and $ 65. This is a value area so look for buyers on a test of this area.
Short term outlook
With the increase in US supply, crude oil traders worry about where demand is coming from to offset these gains. Although some analysts still believe there will be a global oil shortage as long as OPEC + maintains control over production and the number of COVID-19 cases declines as vaccinations increase. Citigroup predicts that oil balances will be in deficit by 1.5 million barrels per day on average over the next six months, even with a continued increase in supply.
The short-term wild card is whether OPEC and its allies decide to increase production at its October meeting.
Those who support an increase in production believe that the rapid rise in crude oil prices could lead to a destruction of demand.
Despite choppy trading this week, we maintain our bullish outlook due to expectations of a continuing supply deficit. Our short-term concerns are rapidly rising prices, resulting in a destruction of demand and a surprise increase in OPEC + production.
Technically, with WTI crude oil trading so close to resistance, traders will need to decide whether they want to continue the market higher or play for a pullback into a support area. Without a surprise development, traders will likely be reluctant to buy strength or a breakout. This allows to play for a withdrawal to support the less risky trade this week.
