US WTI Crude Oil Price Slips For A Second Consecutive Day On US Inventory Surprise Build-up
Key Takeaways:
- The US WTI crude oil futures extended losses for a second consecutive day
- A larger-than-expected crude oil stock build-up weighs heavily on crude oil prices
- A generally stronger U.S. dollar across the board further weighs on the precious black commodity
- 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 inched lower on Thursday during the Asian session as a surprise build-up in weekly crude oil stockpiles overshadowed the escalation in Middle-East tensions and Opec's forecast for demand growth. As of press time, U.S. West Texas Intermediate (WTI) futures fell 20 cents, or 0.26%, to trade at $76.02 a barrel, marking a third straight session of losses and a second successive day of losses in the last three. The precious black liquid is on track to finish the week with modest losses despite a solid start to the week supported by rising geopolitical tensions and a softer U.S. dollar.
U.S. Crude Stocks Surge the Most in 3 Months
Crude oil inventories in the U.S. soared by 12.018 million barrels in the week ending February 9, 2024, the most since early November and more than market expectations of a 2.56 million increase, data from the EIA Petroleum Status Report showed.
Gasoline stocks dropped by 3.658 million, more than forecasts of 1.16 million and distillate stockpiles, which include diesel and heating oil, went down by 1.915 million barrels, more than the consensus of 1.6 million.
Middle-East Tensions
The ongoing Middle East war, which entered its fifth month in February, took another fresh twist for the worse after Israel launched airstrikes in Lebanon earlier this week in retaliation to rockets fired into Northern Israel.
The latest development, plus Netanyahu's hesitates to a Hamas-proposed ceasefire, deals a heavy blow to ceasefire efforts by international partners and further fuels concerns that the conflict could escalate into a regional crisis that would disrupt global oil supplies.
Higher Demand Growth
According to a report published earlier this week by Reuters, OPEC sees the demand for crude oil rising by 2.2 million barrels per day this year, with 106.2 million barrels per day next year, with non-OPEC production expected to increase by 1.2 million, pointing to demand outstripping supply. The forecast was in contrast. However, the International Energy Agency said growing oil output from America will more than offset demand growth this year.
Stronger U.S. dollar
A generally stronger U.S. dollar continues to weigh on crude oil prices as investors continued to scale back their bets on aggressive early rate cuts following hot U.S. inflation prints, which cemented market expectations that the Fed will leave rates unchanged during the March meeting and start cutting rates during the third quarter of 2024. The hot inflation report joins last week's robust U.S. job data and recent hawkish Fed comments to thoroughly debunk the idea of early aggressive rate cuts and support the view that rates will likely stay higher for longer.
Technical Outlook: Four-Hour US WTI Crude Oil Price Chart
From a technical perspective, the US WTI crude oil price overnight move below the key support level plotted by an upward ascending trendline extending from the early-February 2024 swing lower-low confirmed a fresh price breakout, which favors sellers and supports the case for further depreciating moves. A further increase in selling pressure from the current price level would drag spot prices toward the pivot level (P) at $75.13, which sits directly above the technically strong 200 Exponential Moving Average (EMA) at $74.88. Sustained weakness below these levels would negate the near-term bullish outlook and act as a fresh trigger for new sellers to jump in, paving the way for an accelerated drop toward the $72.94 support level (S1). On further weakness, the price could drop toward a trendline support channel extending from the mid-December 2023 swing lower-lows, about which, if sellers manage to breach this floor, the focus will shift further lower to the $70.00 round mark, followed by $69.24.
On the flip side, suppose dip-buyers and tactical traders jump back in and trigger a bullish reversal. In that case, initial resistance comes in at the key support level (upward ascending trendline extending from the early-February 2024 swing lower-low), which has now turned resistance level. A decisive break above this level would affirm the bullish thesis and pave the way for a rise toward the $78.75 resistance level (R1). A clean move above this barricade could see the black liquid price ascend further toward the key resistance level plotted by an upward ascending trendline extending from the late-January 2024 swing higher-high. A subsequent break above this level would act as a fresh trigger for new buyers to jump in, paving the way for a rise towards the $80.00 psychological mark route to the $80.93 ceiling.