Oil News: Bullish Oil Outlook Builds as Supply Risks and API Drawdown Support Futures

WTI Holds Steady as Middle East Tensions Offset Supply Concerns

WTI crude oil futures are trading steady-to-better early Wednesday as Middle East tensions offset concerns over supply. Although oversupply fears may be capping gains, the threat of military action between the United States and Iran is real enough to underpin prices. The geopolitical risk is real — prices jumped in reaction to news that the U.S. shot down an Iranian drone. If that wasn’t enough to rattle the market, armed Iranian boats reportedly approached a U.S.-flagged vessel in the Strait of Hormuz.

At 11:09 GMT, March WTI Crude Oil futures are trading $63.54, up $0.33 or +0.52%.

Just two weeks ago, crude oil prices rose as the U.S. moved an armada into the Strait. But oil retreated at the start of this week after President Trump said over the weekend that Washington and Tehran were talking. But yesterday’s activity in the area serves as a reminder that tensions can escalate at any time, leading traders to maintain the current supply disruption premium.

API Drawdown Adds Support Ahead of EIA Report

In addition to the war premium, the market also found support from Tuesday’s American Petroleum Institute (API) report that showed a more than 11-million barrel drawdown last week.

Wednesday’s U.S. Energy Information Administration (EIA) inventories report is expected to show a 2-million barrel stockpile reduction.

Trend Is Up — Trendline at $62.49 Holds the Key

Technically, the trend is up using all of our metrics. On Tuesday, the market closed on the strong side of a trendline that comes in today at $62.49. This is new support. A break back under this indicator will weaken the momentum.

The swing chart is also indicating an uptrend. A trade through $58.53 will change the main trend to down, while a move through $66.48 will reaffirm the uptrend. A new minor bottom formed at $61.12. If this fails, momentum will shift to the downside.

The main range is $54.84 to $66.48. Its 50% to 61.8% retracement zone at $60.66 to $59.29 is support and a value area.

The market is also trading on the strong side of the 200-day moving average at $60.66 and the 50-day moving average at $58.97. The 200-day MA forms a support cluster at the 50% level at $60.66.

Looking Ahead — Supply Disruption Risk Keeps Bulls in Control

The possibility of a supply disruption is real, so we expect the market to remain underpinned unless there is bearish commentary out of Washington. Holding above the trendline at $62.49 is a sign of strength. The trendline is moving up $0.36 per day. Bullish traders are hoping this creates enough upside momentum to challenge the last swing top at $66.48. A breakout over the longer-term top at $66.49 will indicate the buying is getting stronger, while putting $69.80 on the radar.

More Information in our Economic Calendar.