Downtrend Unfolds in Oil As WTI Returns Below $73 Again

Last week, crude oil prices began to decline again after failing to break through the 200-day SMA which is stretching further this week. Earlier this month, during a global market downturn, WTI crude reached its lowest point of the year. However, rising tensions in the Middle East provided some support, with concerns about potential disruptions in oil production pushing WTI up by $6 within a week. The price surge pushed WTI above $80 when the United States deployed additional troops to the region. Despite this, the 200-day SMA (purple) acted as a barrier, and crude oil prices saw a significant decline both last week and this week.

US WTI Crude Oil Chart Daily – Buyers Failed at the 100 SMA

Israel-Gaza Conflict and China’s Slowdown Weigh on Oil Prices

The downward trend in oil prices continued on Tuesday, influenced by Israel’s acceptance of a plan to resolve conflicts hindering a cease-fire agreement in Gaza. This development, along with concerns about China’s economic slowdown, dampened the demand outlook for oil. WTI crude oil futures fell to as low as $73.50 today after losing about $2 yesterday. Despite these losses, the price managed to recover slightly, climbing back above $74 late in the day. This marks the third consecutive day of losses and the fifth in the last six days, contrasting with the growing optimism surrounding the US and global economies, particularly in stock markets. Additionally, market participants are awaiting the private API inventory data, which could further influence prices.

API Crude Oil Inventories

• Headline Crude Oil Inventories: Increased by +347,000 barrels, indicating a modest build in stockpiles.
• Gasoline Inventories: Decreased by -1.043 million barrels, reflecting a drawdown that could suggest higher consumption or lower production.
• Distillate Inventories: Fell significantly by -2.247 million barrels, pointing to a strong demand for diesel and heating oil or reduced refinery output.
• Cushing, Oklahoma (Crude Storage Hub): Saw a decline of -648,000 barrels, continuing the trend of decreasing stocks at this critical delivery point for WTI crude futures.
• Strategic Petroleum Reserve (SPR): Increased by +700,000 barrels, as the government continues to add to the emergency reserve, potentially affecting market dynamics in the longer term.

Expectations earlier centered on:

• Headline crude -2.7 mn barrels
• Distillates -0.2 mn bbls
• Gasoline -0.9 mn

US WTI Crude Oil Live Chart