Oil News: API Confirms Rising U.S. Crude Stocks, Market Awaits EIA Report for Clarity

Light Crude Oil Futures Edge Lower as Inventories Rise

Light crude oil futures saw a slight pullback on Wednesday, reversing some of Tuesday’s 2.43% rally. The market is now holding above the key 50-day moving average, which stands at $70.61, providing immediate support.

However, futures are facing resistance at the 50% long-term retracement level at $71.63, which has proven difficult to break. A decisive move above this level could spark further gains, potentially driving prices towards the 200-day moving average at $72.97, a key resistance point.

Traders are keeping a close watch on U.S. government oil inventory data, scheduled for release later today, which could inject fresh volatility into the market.

At 10:29 GMT, Light Crude Oil futures are trading $70.73, down $1.01 or -1.41%.

Inventory Data Weighs on Prices

Wednesday’s modest price dip followed data from the American Petroleum Institute (API) showing U.S. crude inventories rose by 1.64 million barrels last week, significantly higher than the 300,000-barrel increase expected by analysts. This jump in crude stocks has pressured prices, particularly as traders had anticipated only a slight rise in inventories.

However, today’s Energy Information Administration (EIA) report at 14:30 GMT will be the key indicator for market direction, with forecasts predicting an additional 900,000-barrel increase in U.S. oil supplies. If this figure exceeds expectations, it could lead to renewed selling pressure as concerns about oversupply in the U.S. market grow.

Middle East Tensions Support Prices

Despite the bearish inventory data, ongoing tensions in the Middle East continue to underpin oil prices. The conflict, particularly between Israel and Iran, has kept traders on edge, driving demand for crude as a hedge against supply disruptions. Tuesday’s gains were likely fueled by the lack of resolution following U.S. Secretary of State Antony Blinken’s visit to Israel, where he held extensive talks with Prime Minister Benjamin Netanyahu and other senior officials.

While no significant breakthroughs were reported, the potential for a prolonged conflict remains a key factor in the oil market. Analysts from ING suggest that traders are pricing in the likelihood of extended unrest, with no immediate resolution in sight. Israel’s recent confirmation of the death of Hezbollah leader Hashem Safieddine, who was targeted in an attack, has only added to concerns of escalating violence in the region.

Market Outlook: Bearish Bias with Volatility Ahead

The near-term outlook for crude oil prices leans bearish, especially if the EIA confirms a larger-than-expected inventory build. A failure to hold above the 50-day moving average could trigger a drop towards the next support level at $69.21, with the minor bottom at $68.17 providing additional downside protection.

On the other hand, should prices break through the 50% retracement at $71.63, a push towards the 200-day moving average at $72.97 is possible, driven by fears of Middle East supply disruptions.

In conclusion, crude oil traders should prepare for heightened volatility, with inventory data and geopolitical headlines set to dictate the next move in prices. A sustained rise in U.S. stockpiles could push oil prices lower, while any escalation in Middle East tensions would likely provide strong support.