Crude Oil News Today: Traders Balancing Supply Risks and Weak Demand

Oil Prices Rise on Supply Concerns Despite Weak Demand

Light crude oil futures trended higher on Thursday, overcoming early weakness as supply disruption fears outweighed demand concerns. The market continues to balance conflicting factors, with geopolitical tensions supporting prices while economic data suggests potential demand weakness.

At 09:38 GMT, Light Crude Oil futures are trading $81.60, up $0.70 or +0.87%.

Middle East Tensions Escalate

Cross-border strains between Israel and Lebanon’s Hezbollah have intensified, raising fears of a wider regional conflict. Turkish President Erdogan expressed solidarity with Lebanon, calling for regional support. The prospect of a conflict involving Iran, a major oil producer, is underpinning prices. Israeli forces have been conducting operations across Gaza, with fierce fighting reported in Rafah, highlighting the ongoing volatility in the region.

U.S. Inventory Build Surprises Analysts

The U.S. Energy Information Administration reported unexpected increases in crude oil and gasoline stocks last week. Crude inventories rose by 3.6 million barrels, contrary to analysts’ expectations of a 2.9 million-barrel drawdown. Gasoline stocks also increased by 2.7 million barrels, defying projections of a 1 million-barrel decrease. These builds are contributing to concerns about weakening demand in the world’s largest oil consumer.

Weak U.S. Gasoline Demand

Product supplied for motor gasoline, a proxy for demand, fell by approximately 417,000 barrels per day last week to 8.97 million bpd. The four-week average for demand is about 2% below last year’s levels, causing concern among traders during the peak U.S. summer driving season. This weakness in gasoline consumption, despite expectations of increased travel, suggests potential economic headwinds affecting consumer behavior.

Economic Data in Focus

Oil traders are closely monitoring U.S. economic data for insights into potential Federal Reserve policy decisions. Key releases include weekly jobless claims, durable goods orders, and pending home sales figures. The personal consumption expenditures price index, the Fed’s preferred inflation gauge, is expected on Friday. These indicators will be crucial in assessing the overall economic health and potential impact on oil demand.

Market Forecast

The oil market outlook remains cautiously bullish in the short term. While weak demand and inventory builds typically pressure prices, the potential for supply disruptions due to escalating Middle East tensions is likely to provide support. Traders should closely monitor geopolitical developments and upcoming economic data for further price direction. The market’s current sideways to rangebound trading pattern over the past six sessions reflects this uncertainty, with traders poised for the next significant catalyst to drive a breakout in either direction.

Technical Analysis

Technically, a three-trends – short, intermediate, long-term – are up, but the market has been moving sideways for six-sessions. That tells me that there is uncertainty and trader indifference. But it also indicates impending volatility, which is a function of the news.

At first glance, support is a Fibonacci level at $80.83, followed by a 50% level at $79.16, which forms a loose price cluster with the 50-day moving average at $78.76.

With the trends up, we’re still in “buy the dip” mode unless traders completely eliminate the geopolitical narrative, that’s a fancy way of saying, if peace breaks out in the Middle East.

On the upside, it’s smooth sailing to at least $83.57 if the news is bullish.