The EIA demand data boosted oil trader’s confidence
The US oil stocks increased for a second consecutive week, but this increase was dwarfed by big declines in gas and distillate stocks, according to weekly government statistics issued on Wednesday. The US Energy Information Administration (EIA) reported an increase of 1.117 million barrels of crude in storage for the week ending March 17th. In the week prior to March 10th, 1.55 million barrels were added.
On the topic of gasoline inventories, the EIA reported a decrease of 6,399M barrels compared to an expected decrease of just 1,677M barrels and a decrease of 2,061M barrels in the week before. Automobile gasoline is the leading fuel product in the United States.
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In terms of distillate inventories, the EIA recorded a decrease of 3,313M barrels, compared to the expected decrease of 1,5M barrels and the previous week’s deficit of 2,537M barrels. In terms of demand, distillates, which are processed into oil for heating, diesel, and jet fuel, have been the most significant element of the US petroleum complex.
Weakening dollar boosts the crudes before Fed
The demand and EIA figures were not the only factors driving oil prices up today. Ahead of a significant interest rate announcement by the Fed, the US dollar weakened. A weakened dollar increases oil demand because it keeps the commodity more affordable for holders of other currencies.
“With risk aversion declining, positive equity markets, and a weaker dollar, oil has managed to recover further” UBS analyst Giovanni Staunovo said.
The market for crude oil will await the Federal Open Market Committee’s (FOMC) decision on interest rates, which will be announced later today. Reuters says that OPEC+ will likely adhere to its agreement on a reduction in supplies of 2 million barrels daily (bpd) this year, despite the decline in oil prices.
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Brent oil futures were up 18 cents, or 0.24%, to $75.50 a barrel, having increased around 3% this week. WTI has finally surpassed the $70 threshold and is currently up 0.76%.
WTI is bullish again
WTI seems to be recovering from the carnage with a steady pace. The trend zone seems to be headed upwards towards the $80 mark seen in March.
So far, the bulls are happy to have broken through the psychological $70 barrier. With enough support from the upcoming data and volumes to back it in the bullish corner, the next mark will definitely be $75.
The bears however, are not hibernating yet. The $70 mark is their new support as the market sentiment improves. There could be a major event like a 50bps hike, which could send the crude towards the $65 mark again.
WTI 1D chart, source: tradingview.com, author’s analysis
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