Crude Oil Specs Hoping Bullish EIA Report Extends Rally

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday as traders continue to assess the potential impact on supply of the United States ban on Russian oil imports.

The reaction to the news on Tuesday and today’s early price action suggests bullish traders may have already priced in the announcement by U.S. President Joe Biden, and are waiting for other countries as well as companies to join the boycott. This could be the news that springs another sharp rally in prices.

At 10:26 GMT, April WTI crude oil futures are trading $122.20, down $1.50 or -1.21% and May Brent crude oil is at $127.03, down $0.95 or -0.74%. On Tuesday, the United States Oil Fund ETF (USO) settled at $85.49, up $3.12 or +3.79%.

One country is Britain that said it would phase out its purchases of Russian oil imports. Additionally, Shell said it would stop buying Russian crude. And there are other signs that demand for Russian energy products will slide with JP Morgan estimating around 70% of Russian seaborne oil was struggling to find buyers.

Russian Oil and Gas Exports Will Have No Where to Go

The U.S. ban on Russian oil and gas imports is likely to leave more cargoes at sea with no buyers, according to Reuters. Additionally, the European Union’s (EU) decision to continue imports was unlikely to make much difference to disarray in Russian oil trade.

One U.S.-based trader said that when it comes to trading Russian oil, the situation was “getting untenable.”

Goldman Sachs estimated that more than half of Russian oil exported from ports remained unsold. “If sustained, this would represent a 3 million bpd decline in Russian crude and petroleum product seaborne exports,” it said on Tuesday.

JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers. “Shipping disruptions in the Black Sea have brought trade deals with the country to a virtual standstill,” the bank said on Tuesday.

Daily Forecast

Today’s early inside trade suggests investor indecision and impending volatility. Now that the U.S. has fulfilled the bullish expectations by banning Russian oil, speculators will be looking for more bullish news to sustain the rally. This could come as early as today with the release of the U.S. Energy Information Administration (EIA) weekly inventories report.

Traders are looking for the EIA to report a 1.1 million crude oil barrel decline. Prices could rise sharply if the drawdown comes in greater than expected. Late Tuesday, the American Petroleum Institute (API) reported a surprise increase of 2.8 million barrels in U.S. crude stocks for the week ended March 4.