Crude Oil News Today: Gains Capped by Profit-Taking as Dollar Strengthens

Oil Prices Retreat on Dollar Strength and Profit-Taking

The rising U.S. dollar is a significant factor influencing oil prices on Wednesday. As the dollar strengthens, it effectively raises the cost of oil for buyers using other currencies, leading to decreased demand. This impact is notable as oil prices had recently reached their highest levels since late October, driven by a strong demand outlook and shrinking supplies.

At 09:16 GMT, Light Crude Oil Futures are trading $81.99, down $0.74 or -0.89%.

Federal Reserve’s Rate Decision in Focus

The trading community’s attention is firmly on the Federal Reserve’s imminent interest rate decision. The general expectation is for rates to remain steady, but the real interest lies in the Fed’s dot plot. Traders are seeking insights into future rate cuts, with some predictions pointing towards a mid-year start. However, unexpectedly high inflation reports might restrict the extent of these cuts, injecting a degree of uncertainty into the oil markets.

Russian Supply Disruptions

Geopolitical tensions are critically influencing oil supply, especially from Russia. The conflict has led to a marked reduction in Russia’s refining capacity, resulting in increased crude exports. This shift is under close scrutiny, as prolonged disruptions could lead to a supply squeeze, particularly if Russian producers are compelled to reduce production due to export challenges.

US Inventory Data: A Key Indicator

Recent data from the American Petroleum Institute (API) shows a drop in U.S. crude and gasoline stockpiles, providing some support to oil prices. The market is now awaiting official data from the U.S. Energy Information Administration (EIA) for further direction. These figures are key in assessing U.S. oil supply levels and can significantly influence market sentiment.

Short-Term Outlook

Considering these factors, the short-term forecast for the oil market is cautiously bullish. The Federal Reserve’s decision could lead to market volatility, while supply concerns, particularly from Russia, offer a supportive backdrop. However, the strength of the U.S. dollar and evolving global economic conditions will be crucial in shaping this bullish trend.

Technical Analysis

Light crude oil futures are inching lower on Tuesday after testing their highest level since November 3 the previous session. Standing in the way of another leg up in this current rally is the static resistance at $82.68.

Trader reaction to $82.68 is likely to set the tone on Wednesday. A sutained move over this level will indicate the buying is strong with $83.24 and $85.54 the next likely targets.

A sustained move under $82.68 will be a sign of weakness, but not a change in trend. The intermediate and long-term trends are expected to remain intact with support at the 50-day moving average at $76.17 and the 200-day moving average at $76.84.