WTI crude oil prices failed to stop their downward rally and experienced a turbulent week, with significant fluctuations influenced by various factors affecting market sentiment.

At the time of writing, the crude oil price is trading at $77.99, with an intra-day low of $77.96. However, the recent downward rally can be attributed to multiple factors, including weak U.S. jobs data, changes in Federal Reserve interest rate expectations, and concerns about global oil demand. Notably, the U.S. Federal Reserve’s decision to maintain current interest rates and the uncertainty regarding when rates might be reduced have raised concerns about economic growth and future oil demand.

Unexpected U.S. Crude Oil Inventory Build Adds Pressure to Oil Prices

Another factor that has been undermining the oil prices this week was the unexpected build-up in U.S. crude oil inventories. According to the U.S. Energy Information Administration (EIA), crude inventories rose by 7.256 million barrels for the week ending April 26, defying market expectations, which had predicted a 2.3 million barrel decrease. This increase, the largest since June 2023, suggests a surplus of oil and has contributed to downward pressure on crude prices. The oversupply in the U.S. indicates a potential slowdown in demand, which tends to push prices lower.

Geopolitical Stability and Economic Uncertainty Weaken Global Oil Demand

On the other hand, the global oil market faces major challenges from weakened demand and diminishing geopolitical risks. However, the concerns about a potential economic slowdown due to rising interest rates have cast doubt on global oil demand. Moreover, geopolitical tensions in the Middle East, particularly between Israel and Hamas, have eased with the prospect of a ceasefire and ongoing negotiations involving international mediators.

Therefore, the reduced geopolitical risks and concerns about an economic slowdown due to rising interest rates have contributed to lower crude oil prices.

Fed Policy Uncertainty and Sluggish U.S. Jobs Data Affect Oil Markets

On the US front, the recent jobs data showed slower-than-expected job growth in April, along with a moderation in annual wage gains. This development has fueled speculation about a possible Federal Reserve interest rate cut later in the year, possibly in September. While such a rate cut could eventually boost economic activity and drive higher oil demand, the uncertainty surrounding the timing of these cuts and the Federal Reserve’s cautious approach to inflation have kept the oil market subdued.

Therefore, the Federal Reserve’s stance on maintaining higher interest rates for a longer period has made investors wary, influencing crude oil prices and adding to the overall uncertainty in the oil market.

WTI Crude Oil Price Forecast: Technical Outlook