Wednesday, data from the American Petroleum Institute (API) showed that crude oil stocks fell by 1.3 million barrels. This came after crude oil stocks fell by 3.069 million barrels the week before.
API data shows that crude oil stocks in the US have grown by less than 10 million barrels so far this year. On the other hand, the amount of crude stored in the country’s Strategic Petroleum Reserves has dropped by 218 million barrels.
Oil prices eased their decline after falling by more than $2 earlier in the session. A weaker dollar helped to offset some of the worries about demand caused by the rising number of Covid cases in China.
Brent futures for February had dropped 96 cents, or 1.15%, to $82.30 per barrel. The more popular March contract fell 1.2% to $82.98. US West Texas Intermediate crude futures dropped $1.13, or 1.43%, to $77.83 a barrel after hitting a low of $76.79 during the session.
The contracts stopped losing money when the US dollar fell. Investors were nervous at the end of the year because their initial excitement about China’s reopening had faded. When the dollar gets weaker, oil gets cheaper for people who use other currencies. This can increase demand.
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Because of the size of the latest Covid outbreak in China and questions about the accuracy of official data, some countries have made it harder for Chinese tourists to visit. In the last few weeks, oil prices went up a lot because China eased up on its Covid zero policies, but the recent rise in cases has made people all over the world more worried.
The fear is that Covid could start to spread again globally. Some countries have already said they will have special rules for Chinese tourists. Places like Italy, the US, India, and Malaysia issued mandatory Covid testing for travellers coming from China.
Putin announced his oil cap counter measures
After the statement that oil from Moscow would cost no more than $60 per barrel, Russian president Vladimir Putin said that oil would no longer be sent to the G7 and EU. This has made it possible that there will be less supply than demand, which could cause a short-term imbalance. The west put a limit on how much Russia could charge for oil, so it couldn’t buy weapons and ammunition for a war against Ukraine. This takes effect from February 1st to July 1st.
WTI oil 1h chart, source: tradingview.com, author’s analysis
From a technical point of view, WTI is on track to lose money for the third day in a row. We can see the chart is mostly flat during the holidays as volumes are lower. The $80 a barrel mark is still important as the current resistance especially as a psychological barrier. The 200-day moving average is at $94.79 well above the current trading range. Bears could be sniffing around the $76 support which has already been tested today.