Oil News: Rising U.S. Stockpiles Cap Gains Amid Seasonal Demand Surge

Oil Prices Hold Steady Amid Mixed Signals from Demand and Inventories

Light crude oil futures are trading nearly flat after a bearish closing price reversal pattern was confirmed early Thursday. This signals the possibility of a short-term pullback, with potential downside targets including the 200-day moving average at $72.34 and the long-term 50% retracement level at $71.10. Conversely, a breakout above $75.29 would negate the reversal, resuming the uptrend with $77.36 as the next target.

At 11:27 GMT, Light Crude Oil futures are trading $73.45, up $0.13 or +0.18%.

Market Balances Demand with Rising U.S. Inventories

Oil markets remained steady on Thursday as traders weighed robust seasonal demand against a stronger U.S. dollar and an unexpected rise in U.S. fuel inventories. Official Energy Information Administration (EIA) data showed increased gasoline and distillate stockpiles, adding bearish pressure to prices.

Wednesday’s session saw oil benchmarks lose over 1% due to a rally in the dollar, driven by rising Treasury yields. According to Kelvin Wong, senior market analyst at OANDA, “Seasonal demand supports the bulls, but macroeconomic data and dollar strength cap further advances.”

Demand Outlook Remains Positive for January

Despite inventory concerns, demand forecasts remain strong. JPMorgan analysts project global oil demand in January to rise by 1.4 million barrels per day (bpd) year-on-year, reaching 101.4 million bpd. This growth is fueled by increased heating fuel consumption during colder-than-usual winter conditions and travel demand in China ahead of the Lunar New Year.

Brent futures market structure also reflects tightening supply concerns. The front-month Brent contract’s premium over the six-month contract widened to its largest since August, a sign of strengthening backwardation and potential supply constraints.

Saudi Arabia Adjusts Supply to Asia

Saudi Arabia’s crude oil supply to China is expected to decline in February following a hike in official selling prices (OSPs) to Asia. This marks the first increase in three months and reflects Saudi Arabia’s efforts to balance tighter supplies with robust Asian demand.

Market Forecast: Neutral to Slightly Bullish

WTI crude oil is expected to trade within the $71.10 to $77.36 range in the near term. The market’s next significant move will depend on macroeconomic factors and further details on fiscal measures from China. While rising inventories and a stronger U.S. dollar exert downward pressure, robust seasonal demand and tightening supplies offer a bullish backdrop.

A sustained break above $75.29 would signal a continuation of the uptrend, with $77.36 as the next target. Additionally, holding above the 200-day and 50-day moving averages is likely to provide strong support for prices.

More Information in our Economic Calendar.