US WTI Crude Oil Price Rises On Potential OPEC+ Supply Cuts As Latest EIA Data Raises Concerns About Slowing Demand.
Key Takeaways:
- The US WTI crude oil futures rose slightly on Thursday during the Asian session to trade above $78.00 a barrel
- A larger-than-expected crude oil stock build-up raises concerns about slowing demand
- A softer U.S. dollar across the board extends support to crude oil
- Rising geopolitical tensions remain supportive of crude oil prices, which might help limit further losses
The U.S. West Texas Intermediate (WTI) crude oil price rose slightly on Thursday during the Asian session as uncertainty about the timing of the interest rate cuts and a larger-than-expected build in crude stockpiles offsets support from potential OPEC+ supply cuts.
As of press time, U.S. West Texas Intermediate (WTI) futures rose 31 cents, or 0.40%, to trade at $78.45 a barrel. The oil movement follows a modest rebound from the vicinity of the $78.07 level touched earlier in the session. It helps pare losses from the previous two sessions as a stronger U.S. dollar weighed heavily on crude oil prices. Nevertheless, the current price move marks a third day of positive moves in the previous four, with the precious black liquid likely finishing the week with heavy gains.
U.S. crude oil Stock rises more than expected
Crude oil inventories in the U.S. rose by 4.199 million barrels in the week ending February 23, 2024, more than market expectations of a 2.743 million increase, data from the EIA Petroleum Status Report showed. This spike in inventories is primarily attributed to a slowdown in refinery processes converting crude oil into finished products. To a greater extent, the data indicated slowing crude oil demand, which in turn weighs on crude oil prices.
OPEC Supply Cuts
Further supporting crude oil prices is Reuters' news earlier this week that the Organization of Petroleum Exporting Countries and its allies (OPEC+) are considering extending their voluntary production cuts into the second quarter.
Softer U.S. Dollar
A softer U.S. dollar, weighed by uncertainty about the timing of interest rate cuts, is another factor extending support to crude oil prices.
Furthermore, the U.S. dollar continues to be weighed down by a fresh batch of disappointing U.S. macro data released on Wednesday, which showed the U.S. economy expanded an annualized 3.2% in Q4 2023, slightly below 3.3% in the advance estimate, following a 4.9% rate in Q3. The downward revision is due to private inventories, which subtracted 0.27 pp from the growth, compared to an addition of 0.07 pp seen in the advance estimate.
The upside, however, seems limited as the U.S. dollar continues to draw support from firm expectations that the Fed will leave rates unchanged during the March and May meetings and start cutting rates during the third quarter of 2024.
The bets were reaffirmed after the latest Fed meeting minutes were released last week on Wednesday, which showed the Fed is concerned about cutting rates too soon, signalling early rate cuts were entirely off the table.
The January FOMC Meeting minutes came days after a U.S. Bureau of Labor Statistics (BLS) report showed consumer and wholesale inflation rose in the U.S. in January, which, when combined with robust U.S. job data and the recent hawkish Fed official's comments, fully debunks the idea of early aggressive rate cuts and supports the view that rates are likely to stay higher for longer.
Despite this, rising geopolitical tensions continue to support the dollar-denominated commodity, and any further escalation of the conflicts in the Middle East would help keep a floor under oil prices.
As we advance, oil traders look forward to the release of the U.S. Core PCE Price Index data, which is referred to as the Fed's preferred inflation gauge. The key data will offer more cues on the Fed's future monetary policy action. They will impact U.S. dollar price dynamics and help provide directional impetus for crude oil prices.
Technical Outlook: Four-Hour US WTI Crude Oil Price Chart
From a technical standpoint, the US WTI crude oil price is trading with a bullish bias above the 78.00 mark, having rebounded from the vicinity of the $78.07 level, which had formed a new higher-low following an earlier corrective slide from the vicinity of $79.58 (higher-high). For the price to form a new higher-high level, it must first find acceptance above the initial resistance level of $78.52 (R1). A clean break above this level would facilitate a run toward the $79.25 level before shifting attention toward the key support level plotted by an upward ascending trendline extending from the mid-February 2024 swing to higher highs. A break above this level will pave the way for further extension of the bullish momentum, paving the way for the price to form a new higher-high level.
On the flip side, if sellers resurface and spark a bearish turnaround, initial support comes in at the $78.07 level (P). If sellers manage to breach this floor, followed by a breach below the $77.17 YTD low, downside pressure could accelerate, paving the way for a drop toward the $76.72 level (S1). On further weakness, the focus shifts toward the technically strong 200-day (brown) Exponential Moving Average (EMA) at $76.20. A convincing move below this level would negate the bullish outlook and pave the way for aggressive technical selling.