Crude oil prices erased nearly all of Wednesday’s gains, as the market reacted to higher-than-expected US inventory data. Brent crude CFDs traded at $82.78, down -0.37%, at 13.20 UTC, while West Texas Intermediate (WTI) followed a similar pattern, losing 0.28% to trade at $77.75 per barrel. The commodity has been trading sideways over the last three days, and a weak US dollar has not helped pump up prices.
Industry body American Petroleum Institute (API) data released on Wednesday showed a substantial uptick in US crude oil inventories, underlining demand-side concerns. The API report gave a readout of 7,186,000 barrels’ worth of reserves which topped the expected 4,298,000 barrels. This aligns with International Energy Agency’s earlier projection of a decline in the daily demand for oil. However, the official release by the EIA on Thursday will trigger a higher-impact reaction in the market.
The situation might just turn worse for dollar-priced oil by the weekend, as the US Dollar is forecasted to strengthen following lower-than-expected Initial Jobless Claims figure printout in the US. According to the Department of Labor, the United States economy recorded a third-consecutive week of a decline in jobless claims. There were 201k Initial Jobless Claims in the week ending February 17th, lower than the consensus figure of 217k.
The lack of a response by the commodity is meaningful in the context of a recovery by the dollar because it could pose challenges for price improvements. The dollar index, DXY, has been on a six-days downtrend, on weak dollar fundamentals. However, oil may yet get support from growing positive sentiment around China’s economy following a series of good macroeconomic news in the days after the Lunar New Year holiday. The country’s equities markets have been on the rise since the week began, and the government has also lowered mortgage interest rates to support the struggling property market.
Technical Analysis
Oil price will likely pivot at 77.74. The commodity faces resistance at 77.99, but a break past this mark could create momentum to test 78.47. However, if the momentum eases, the price action could head south of the 77.74 pivot, from which support will be established at 77.57, thus invalidating the bullish view. Further control by the bears could see the next support move to 77.32.
Oil price on a 30-minute chart