Oil News: API Data Reveals Sharp Draw in U.S. Crude Stocks, Boosting Futures

Futures Edge Higher as Traders Monitor Fed Decision and Inventory Draw

Light crude oil futures edged higher Tuesday, trading above the 50-day moving average of $69.41. Market participants are cautiously attempting to establish a support base, with resistance looming at the 50% retracement level of $71.10. A breakout above this level could push prices toward the 200-day moving average at $72.48. However, failure to maintain the 50-day support may prompt a retest of the Fibonacci level at $68.69, indicating a potentially bearish reversal.

At 11:44 GMT, Light Crude Oil futures are trading $70.15, up $0.50 or +0.72%.

Focus on Federal Reserve’s Interest Rate Decision

Traders are exercising caution as the U.S. Federal Reserve’s two-day policy meeting concludes Wednesday, with markets pricing in a 95.4% probability of a quarter-point interest rate cut. Investors are eyeing the updated economic projections and the “dot plot” for clues on monetary policy through 2025 and 2026.

Lower interest rates typically reduce borrowing costs, fostering economic growth and increasing oil demand. However, uncertainty over future rate cuts in 2024 and inflation concerns tied to U.S. policies are keeping upward price movements in check.

U.S. Crude Inventories Show Strong Drawdown

Adding support to crude prices, the American Petroleum Institute (API) reported a significant draw of 4.69 million barrels in U.S. crude inventories for the week ending December 13, exceeding analysts’ expectations of a 1.6-million-barrel draw. However, gasoline and distillate stocks increased by 2.45 million barrels and 744,000 barrels, respectively.

The official U.S. Energy Information Administration (EIA) data, due Wednesday, will offer more clarity on inventory levels and their impact on supply-demand trends. Traders are balancing this bullish signal with the broader macroeconomic narrative dominated by the Federal Reserve’s decisions.

Geopolitical Risks and European Sanctions Add to Uncertainty

On the geopolitical front, the European Union has introduced its 15th sanctions package against Russia, targeting an additional 33 vessels from the shadow fleet used for crude and petroleum transport. The UK also sanctioned 20 ships for carrying illicit Russian oil. While the sanctions have yet to significantly disrupt Russia’s participation in global oil markets, they add a layer of uncertainty to the supply outlook and could stoke volatility.

Market Forecast: Cautiously Bullish

Light crude oil prices are showing resilience, supported by a substantial inventory draw and expectations of economic support from lower interest rates.

However, with resistance at $71.10 and mixed sentiment from Fed policy projections, upside momentum remains constrained. A breakout above $71.10 could indicate a bullish rally toward $72.48, while failure to hold above $69.41 might signal renewed downside pressure.

Traders should brace for potential volatility following the Fed’s announcement and EIA inventory data release.

More Information in our Economic Calendar.