Crude Oil News Today: Higher on Anticipated Inventory Drawdown, Geopolitics

Overview

Light crude oil futures are edging higher on Wednesday, marking the fifth consecutive session of consolidation as traders anticipate the U.S. Energy Information Administration’s (EIA) weekly inventories report, due at 14:30 GMT.

At 10:32 GMT, Light Crude Oil futures are trading $81.56, up $0.73 or +0.90%.

Inventory Drawdown and Geopolitical Risks

Oil prices neared their highest level in almost two months, driven by forecasts for an eventual inventory drawdown during the peak summer demand season and geopolitical risks in the Middle East. The American Petroleum Institute (API) reported a rise in U.S. crude oil stocks by 914,000 barrels, but analysts expect a decline of nearly 3 million barrels in the official data.

Market Sentiment and Demand

Despite a stronger dollar capping gains, the market remains optimistic about a potential rate cut before the end of the year. The dollar’s strength makes dollar-priced oil more expensive for holders of other currencies. The prevalent view is that demand will increase during the summer, with geopolitical tensions adding support to prices.

Official Data and Physical Demand

Strength in front-month prices indicates strong physical demand for oil, with August Brent and WTI prices around 80 cents a barrel higher than September prices. Key oil market indicators suggest crude’s rebound reflects a stronger underlying physical market.

Geopolitical Developments

Geopolitical risks, such as Houthi attacks on shipping in the Red Sea and increasing Israel-Hezbollah hostilities in Lebanon, are also bullish for oil prices. The Houthis have reportedly sunk two vessels and seized another, impacting oil supply routes.

Economic Factors

Crude oil prices fell 1% on Tuesday due to weak U.S. consumer confidence data, raising concerns about the economic outlook and fuel demand. High inventory levels have also made traders nervous about summer driving demand. U.S. consumer confidence decreased in June, which could affect gasoline demand.

Market Forecast

In the short term, oil prices are expected to be supported by anticipated inventory drawdowns and ongoing geopolitical tensions. Analysts predict a bullish outlook for crude, given the strong physical demand and potential supply disruptions from geopolitical conflicts.

Technical Analysis

Daily light crude oil futures are consolidating for a fifth session on Wednesday, suggesting investor indecision and impending volatility.

The market is currently trading on the bullish side of both the 50-day moving average at $78.82 and the 200-day moving average at $77.74, giving it a bullish bias.

The short-term range is $86.24 to $72.08. crude oil is currently staddling its Fibonacci level at $80.83 with support the 50% level at $79.16.

With the trend up, we expect traders to buy any dips into support, especially the price cluster at $79.16 to $78.83.

A breakout to the upside will target $83.67, followed by $86.24.