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Crude Oil News Today: API Reports Unexpected Inventory Changes Ahead of EIA Data

By:
James Hyerczyk
Published: May 30, 2024, 10:29 GMT+00:00

Key Points:

  • Oil prices dip due to strong U.S. economic activity potentially keeping borrowing costs high, impacting demand.
  • Brent futures are set to decline over 5% this month, while WTI is poised for a drop of more than 3%.
  • API data shows U.S. crude stocks fell by 6.49 million barrels, surpassing the expected 1.9 million barrel decrease.
Crude Oil News Today

In this article:

Oil Prices Ease on U.S. Economic Resilience

Oil prices dipped on Thursday following indications that robust U.S. economic activity could keep borrowing costs elevated for an extended period, potentially impacting demand. Brent futures and U.S. West Texas Intermediate (WTI) crude both experienced declines ahead of the latest U.S. crude oil stockpiles data release.

At 09:35 GMT, Light Crude Oil futures are trading $79.10, down $0.13 or -0.16%.

Monthly Losses for Brent and WTI

Both benchmarks are headed for monthly losses. Brent futures are on track for a decline of over 5% from the previous month, while WTI is set to drop by more than 3%. This downturn reflects a broader risk-off environment that has exerted downward pressure on oil prices, overshadowing a larger-than-expected drawdown in U.S. crude inventories reported by the American Petroleum Institute (API).

API Reports Significant Inventory Drawdown

According to API data released on Wednesday, U.S. crude oil and gasoline inventories fell last week, while distillate stocks rose. Crude stocks were reported down by 6.49 million barrels for the week ending May 24, surpassing analysts’ expectations of a 1.9 million barrel decrease. Gasoline inventories decreased by 452,000 barrels, and distillate stocks increased by 2.045 million barrels, contrasting with projections of a 1 million barrel draw in gasoline and a 400,000 barrel build in distillates.

OPEC+ Meeting and Global Oil Inventories

Rising global oil inventories through April due to subdued fuel demand may bolster the case for OPEC+ to maintain supply cuts. OPEC+ producers, including the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, are set to meet on June 2. Analysts and delegates suggest that current production cuts might be extended until the end of the third quarter to support prices.

Impact of Fed Policies on Oil Prices

Oil markets have been pressured by expectations that the Federal Reserve will maintain higher interest rates for an extended period. Brent crude settled at its lowest in over three months on May 23. A recent Fed survey indicated that U.S. economic activity continued to expand from early April to mid-May, albeit with growing pessimism about the future and modest inflation increases. Higher borrowing costs typically restrict funds and consumption, negatively affecting crude demand and prices. Market expectations now suggest that the Fed may not cut rates until September, rather than the previously anticipated June.

Market Forecast: Bearish Outlook

Given the persistent pressure from high borrowing costs and potential extensions of OPEC+ production cuts, the short-term outlook for oil prices remains bearish. Traders should prepare for continued volatility, with potential support levels being tested as market trends evolve.

Technical Analysis

Daily Light Crude Oil Futures

Light crude oil futures are edging lower on Thursday after yesterday’s downside reversal. The market remains trapped between the 200-day moving average at $78.19 and the 50-day moving average at $80.93. This price action suggests trader indecision and impending volatility.

Additional resistance is the 50% level at $81.40, while support is being provided by the 50% level at $77.33, which is just above the last swing bottom at $76.15.

The chart pattern suggests traders are awaiting news, which is likely to come in the form of the OPEC+ production decision.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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