- Crude oil markets rally after EIA reports significant draw in US inventories
- WTI is still below the highs reached earlier in the week.
- Geopolitical concerns continue to add a risk premium to energy.
He West Texas Intermediate (WTI) crude oil US crude oil rebounded towards the upper end on Wednesday, climbing back towards $83.50 per barrel after an early drop to $82.00. The Energy Information Administration (EIA) published a much larger weekly drawdown in US crude oil inventories, triggering a recovery in risk despite an initial drop following worse-than-expected US economic figures.
According to the EIA, the U.S. crude oil stock change for the week ending June 28 contracted sharply by -12.157 million barrels, well below the forecast for a -150,000 million barrel decline and completely outpacing the previous week’s 3.591 million barrel increase. The EIA also noted similar, though smaller, declines in gasoline and distillate inventories over the same period.
Crude oil markets initially held off on Wednesday ahead of an EIA-led rally, with WTI retreating to $81.00 per barrel after the US reported a broad miss in key economic figures. ADP Employment Change dropped to 150,000 from 157,000 previously, Initial Jobless Claims rose to 238,000 for the week ended June 28 from 233,000, and the US Services Purchasing Managers’ Index (PMI) for June fell to a multi-year low of 48.8 compared to 53.8 the previous month.
The ongoing conflict between Israel and Hamas in Palestine continues to escalate in the Middle East, keeping a firm risk bid supporting crude oil prices as energy traders fear that a destabilization of the situation could cause the conflict to spill over into neighboring countries, specifically directly involving Iran in the affairs.
Economic indicator
Change in EIA oil reserves
It is a measure of the change in the crude oil stock and is published by the Energy Information AdministrationThis report indicates oil demand and price volatility. Since oil prices impact the global economy, it is expected to affect currency volatility, especially the Canadian dollar. It should be noted that Canada is the 14th largest oil producer, so high demand is bullish for the Canadian dollar. Despite having a low impact across currencies, the report does tend to affect oil prices, so it may have a more noticeable impact.
Latest Post: Wed Jul 03, 2024 14:30
Frequency: Weekly
Current: -12.157M
Dear: -0.15M
Previous: 3.591M
Fountain: US Energy Information Administration
Technical Outlook for WTI
Despite some bullish momentum on Wednesday, WTI is trading south of the early-week highs near $83.75 and found a fresh technical floor in the $82.00 area. However, intraday price action still remains just north of the 200-hour exponential moving average (EMA) at $81.55.
After a bullish breakout from a short-term consolidation phase, WTI is leaning more towards a bullish run, but momentum remains thin and could see crude oil retreat towards the 200-day EMA rising above the $74.00 zone.
WTI hourly chart
WTI daily chart
WTI Oil FAQs
WTI crude oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for its relatively low gravity and sulfur content, respectively. It is considered a high-quality oil that is easily refined. It is sourced in the United States and distributed through the Cushing hub, considered “the pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main factors determining the price of WTI crude oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can disrupt supply and impact prices. Decisions by OPEC, a group of large oil producing countries, are another key driver of price. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US Dollars, so a weaker Dollar can make oil more affordable and vice versa.
The weekly oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI oil. Changes in inventories reflect fluctuations in supply and demand. If the data show a decrease in inventories, it may indicate an increase in demand, which would push up the price of oil. An increase in inventories may reflect an increase in supply, which pushes down prices. The API report is published every Tuesday, and the EIA report the following day. Their results are usually similar, with a difference of 1% between them 75% of the time. The EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide on member countries’ production quotas at biennial meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC countries, most notably Russia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
