Crude Oil Price Update – Smaller-than-Expected US Crude Build Helps Stabilize Market

U.S. West Texas Intermediate crude oil futures closed nearly flat on Wednesday after a government inventories report showed a smaller-than-anticipated build. The news offset Tuesday’s weaker-than-expected Richmond Manufacturing Index.

On Wednesday, March WTI crude oil futures settled at $80.15, up $0.02 or +0.02%. The United States Oil Fund ETF (USO) finished at $70.49, up $0.27 or +0.39%.

EIA Report Not as Bad as Forecast

WTI prices briefly rose by over $1.00 per barrel on Wednesday after the Energy Information Administration (EIA) said that U.S. crude inventories rose by 533,000 barrels in the last week to 448.5 million barrels. Analysts polled by Reuters were expecting a 1.2 million-barrel rise.

The EIA data offset Tuesday’s report that showed U.S. business activity contracted in January for the seventh straight month, raising concerns about an economic slowdown.

Traders are now looking forward to Thursday’s fourth-quarter U.S. Advanced GDP report. It is expected to show a gain of 2.6%, down from the previously reported 3.2%.

A lower reading should support the case for an easing of Fed rate hikes. This could weaken the U.S. Dollar, which would make dollar-denominated crude oil more attractive to foreign buyers.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $82.66 will signal a resumption of the uptrend. A move through $72.74 will change the main trend to down.

The minor trend is also up. A move through $78.45 will change the minor trend to down. This will shift momentum to the downside.

The main range is $89.89 to $70.56. The market has been testing its retracement zone at $80.23 – $82.51 for nearly two-weeks.

On the downside, the nearest support is a minor pivot at $77.70, followed by a short-term retracement zone at $76.61 – $75.18.

Daily Swing Chart Technical Forecast

Trader reaction to the main 50% level at $80.23 is likely to determine the direction of the March WTI crude oil market early Thursday.

Bullish Scenario

A sustained move over $80.23 will indicate the presence of buyers. This could trigger an acceleration into a resistance cluster at $82.51 – $82.66. This is followed by a main top at $83.14. Taking out this level with strong volume could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under $80.23 will signal the presence of sellers. This could trigger a quick break into the minor bottom at $78.45, followed by the minor pivot at $77.70.

If $77.70 fails as support then look for the selling to possibly extend into the short-term retracement zone at $76.61 – $75.18.