Crude Oil News Today: US Stockpile Rise Sparks Demand Worries Ahead of PCE Data

James Hyerczyk
Updated: Feb 29, 2024, 14:32 UTC

Key Points:

  • Unexpected U.S. crude stockpile increase indicates demand issues.
  • Brent and WTI record consecutive monthly gains.
  • OPEC+ considers extending output cuts amid market uncertainty.
Crude Oil News Today

U.S. Stockpile Build and Interest Rate Concerns

The oil market witnessed a tepid response as U.S. crude stockpiles showed an unexpected rise, sparking concerns over demand. According to the Energy Information Administration (EIA), crude inventories increased significantly, surpassing analysts’ expectations. This build-up points to potential demand softness in the U.S. economy. Simultaneously, expectations of sustained high U.S. interest rates are causing apprehension among traders, as higher borrowing costs can dampen economic growth and, consequently, oil demand.

Monthly Gains in Brent and WTI

Despite these concerns, both Brent and West Texas Intermediate (WTI) crude are on track to register their second consecutive month of gains. Brent is nearing a 2% increase, while WTI has gained about 3% in February. These gains, however, are being overshadowed by the larger macroeconomic factors at play.

Impact of PCE Report and Fed’s Stance

Market focus now shifts to the upcoming U.S. personal consumption expenditures (PCE) price index. This index, a key measure of inflation favored by the Federal Reserve, is expected to show a monthly rise. A stronger-than-anticipated PCE report could reinforce the “higher for longer” view on interest rates, affecting market sentiment and potentially impacting oil prices negatively. Wall Street’s reaction to this data will be crucial in determining short-term market direction.

OPEC+ and Output Cuts

On the supply side, OPEC+ is contemplating extending its voluntary output cuts, which have been supporting prices. The group’s decision, expected in early March, will be a significant determinant of oil supply dynamics in the coming quarters. The potential extension of these cuts could provide a floor for prices amidst the current market uncertainty.

Short-term Forecast: Cautiously Bearish

Given the mix of rising U.S. stockpiles, the looming PCE report, and the uncertainty surrounding OPEC+ decisions, the short-term outlook for oil markets appears cautiously bearish. While the supply cuts by OPEC+ provide some support, the major concerns regarding U.S. economic growth and interest rates may exert downward pressure on oil prices in the near term.

Technical Analysis

Daily Light Crude Oil Futures

Despite the cautiously bearish outlook for crude oil, according to the fundmentals, the daily technical outlook is leaning toward bullish. Providing the key support that is giving the market this upside bias is the 200-day moving average at $76.56.

A sustained move over $76.56 will indicate the presence of buyers. If this creates enough upside momentum then watch for a surge into the main top at $79.85. This level is a potential trigger point for an acceleration to the upside.

A failure to hold the 200-day MA will be a sign of weakness. This could lead to a rangebound trade with the 50-day MA key support at $74.58.

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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