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Crude Oil News Today: Fed’s Rate Decision, Rising US Stocks Pressure Prices

By:
James Hyerczyk
Updated: Jun 13, 2024, 23:28 GMT+00:00

Key Points:

  • The Federal Reserve's decision to delay an interest rate cut until December pressures oil demand.
  • U.S. crude stockpiles rise by 3.7 million barrels, well above the expected decline.
  • Heightened geopolitical tensions and supply issues continue to impact crude oil market conditions.
Light Crude Oil Futures

In this article:

Oil Prices Under Pressure from Fed’s Stance and Rising Stockpiles

Oil prices fell in early trade on Thursday as the market absorbed signals from the U.S. Federal Reserve about the likely delay of an interest rate cut until December. Concurrently, ample U.S. crude and fuel stocks further pressured prices.

At 09:10 GMT, Light Crude Oil futures are trading $78.08, down $0.42 or -0.54%.

Fed Impact

The Federal Reserve held interest rates steady on Wednesday, suggesting the onset of policy easing might not occur until late in the year. Higher borrowing costs typically constrain economic growth, thereby limiting oil demand. Fed Chair Jerome Powell, in a post-meeting press conference, indicated that inflation has decreased without significantly harming the economy. He emphasized the Fed’s readiness to maintain the current rate until more concrete economic shifts are evident.

Powell noted the labor market’s strength and the gradual progress towards price stability. The Fed aims for a slow decline in inflation to its 2% target, with the personal consumption expenditures (PCE) price index expected to remain nearly unchanged by year-end. This cautious approach keeps potential rate cuts to a minimum for 2024, contingent on further data on inflation and labor market conditions.

EIA Data

Adding to the bearish sentiment, the Energy Information Administration (EIA) reported a substantial rise in U.S. crude inventories, which increased by 3.7 million barrels for the week ending June 7, significantly above the expected 1.55 million barrel decline. Fuel inventories also saw a notable increase, reinforcing concerns about excess supply. Moreover, the EIA revised its forecast for oil demand growth in 2024 downward by 100,000 barrels per day (bpd), now estimating a growth of 960,000 bpd. This adjustment reflects a more cautious outlook on future oil consumption.

IEA Report

The International Energy Agency (IEA) released a bearish report warning of potential oversupply in the near term, contrasting with OPEC+’s bullish demand forecasts earlier in the week. This divergence in outlooks has added to market uncertainty.

Geopolitical Issues

Geopolitical factors continue to play a role in market conditions. Traders are closely monitoring ceasefire negotiations in Gaza, which, if successful, could alleviate concerns over potential supply disruptions from the region. Recent attacks on shipping in the Red Sea by Iran-allied Houthi militants have also heightened fears of supply chain disruptions.

Market Forecast

Given the current data and geopolitical tensions, the crude oil market is facing a bearish outlook in the short term. The Fed’s indication of delayed rate cuts, coupled with rising U.S. crude stockpiles and cautious demand forecasts, suggest that oil prices may continue to face downward pressure in the coming weeks. Traders should remain vigilant for any changes in economic indicators and geopolitical developments that could impact market conditions.

Technical Analysis

Daily Light Crude Oil Futures

Light crude oil futures are edging lower on Thursday, while straddling the 200-day moving average at $78.17. Trader reaction to this long-term indicator will set the tone over the near-term.

A sustained move over the 200-day MA will indicate the presence of buyers. This could trigger a rally into the resistance cluster formed by the 50-day moving average at $79.84 and the short-term top at $80.11.

On the downside, a failure to hold the long-term support could lead to a quick test of the pivot at $76.41. Look for a technical bounce on the first test of this level. If it fails then prices could accelerate to the downside.

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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