Crude Oil News Today: Gains Capped as Interest Rate Worries Persist

James Hyerczyk
Updated: Jun 21, 2024, 16:28 GMT+00:00

Key Points:

  • Crude oil futures are lower as prolonged high interest rates in Asia and the U.S. weigh on prices.
  • Japan's core consumer prices rose by 2.5% in May, potentially leading to higher interest rates and impacting oil demand.
  • U.S. crude inventories fell by 2.5 million barrels, exceeding expectations and providing some support to oil prices.
Light Crude Oil Futures

In this article:

Crude Oil Futures Flat on Interest Rate Concerns

Crude oil futures are flat in early trading on Friday, driven by concerns over prolonged high interest rates in both Asia and the United States. Despite these pressures, a reduction in U.S. oil inventories has provided some support to prices.

At 10:02 GMT, Light Crude Oil futures are trading $81.28, down $0.01 or -0.01%.

Japan’s Rising Consumer Prices

Japan’s core consumer prices increased by 2.5% in May compared to the previous year, according to data released on Friday. This growth exceeded the previous month’s rate and suggests that Japan’s central bank may continue to raise interest rates in the coming months. Higher interest rates in Japan could slow economic activity and reduce oil demand, adding downward pressure on crude prices.

Strong U.S. Employment Data

In the United States, data released on Thursday indicated a decrease in new unemployment claims for the week ending June 14. The persistent strength in the U.S. jobs market raises the likelihood that the Federal Reserve will maintain higher interest rates for a longer period. As higher interest rates typically dampen economic growth and oil demand, this development is contributing to the bearish sentiment in the oil market.

U.S. Crude and Gasoline Inventory Drawdowns

U.S. crude oil inventories fell by 2.5 million barrels in the week ending June 14, reaching 457.1 million barrels, according to the Energy Information Administration (EIA). This drawdown exceeded analysts’ expectations of a 2.2 million-barrel decrease.

Additionally, gasoline inventories saw a significant reduction of 2.3 million barrels to 231.2 million barrels, contrary to forecasts of a 600,000-barrel increase. The decline in gasoline stockpiles was highlighted by Bob Yawger, director of energy futures at Mizuho in New York, who noted that gasoline had a strong report for the first time this summer driving season.

Market Forecast: Cautiously Bullish Outlook

Despite concerns over high interest rates and their potential impact on economic growth and oil demand, the crude oil market has shown resilience. The recent seven-week high and two consecutive weekly gains suggest that traders are optimistic about current demand. The reduction in U.S. crude and gasoline inventories further supports this bullish sentiment.

However, caution is warranted as a slowing economy and sustained high interest rates could affect demand in the longer term. For now, the outlook remains cautiously bullish, with traders advised to monitor economic indicators closely.

Technical Analysis

Daily Light Crude Oil Futures

Light crude oil futures are struggling to gain traction on Friday, nonethless, the market is poised to settle near a seven-week high that could carryover into next week’s trade.

The daily chart suggests the market has a clear shot at $83.57 and is well-supported by the 50-day moving average at $78.99.

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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