Oil Price Update: Positive Earnings Boost WTI Oil as Fuel Demand Surges

WTI Highlights

• WTI Oil up on output decline, demand rise, earnings
• Exxon, Chevron cut costs amid inflation
• Lowest U.S. crude output since Dec., highest fuel demand since Nov.

WTI Oil Overview

U.S. benchmark West Texas Intermediate crude oil finished over 2% higher on Friday after energy firms posted positive earnings and U.S. data showed crude output was declining while fuel demand was growing.

On Friday, WTI Oil settled at $76.65, up $1.85 or +2.47%. The United States Oil Fund ETF (USO) closed at $67.49, up $1.68 or +2.55%. WTI gained about 1% in April. That was the first monthly increase in WTI prices in six months.

Exxon, Chevron Benefit from Demand

Exxon Mobil Corp and Chevron Corp have benefited from high demand and maintained their cost-cutting measures that were implemented during the COVID-19 lockdowns. Meanwhile, although U.S. consumer spending remained steady in March, the continued robustness of underlying inflation pressures may cause the Fed to raise interest rates once again in the upcoming week to curb inflation. This could potentially exacerbate concerns of a recession.

WTI Oil Declines Amid Uncertainty

WTI experienced a second consecutive week of decline, despite daily gains. This was due to concerns over the demand outlook caused by disappointing U.S. economic data and uncertainty surrounding interest rates.

Throughout the week, the market was under pressure due to worries about a potential economic recession and the expansion of the banking crisis involving First Republic.

Nonetheless, positive developments emerged on Friday with news suggesting a resolution to the First Republic issue, as well as data indicating an increase in oil demand and a decrease in output.

Efforts Underway to Save First Republic Bank

Three sources familiar with the matter have revealed that urgent discussions are being coordinated by U.S. officials in an attempt to save First Republic Bank. Despite the efforts of the bank’s advisers in leading private-sector initiatives to secure a deal, a resolution has yet to be reached.

The Federal Deposit Insurance Corp (FDIC), the Treasury Department, and the Federal Reserve are among the government bodies that have initiated talks with financial institutions to find a solution for First Republic.

US Crude Production Drops Again

In February, U.S. crude production dropped to 12.5 million barrels per day (bpd), which was its lowest point since December.

Meanwhile, fuel demand increased to nearly 20 million bpd, marking its highest level since November, as reported by the Energy Information Administration (EIA).

The EIA also revealed that crude oil and gasoline inventories in the U.S. decreased more than expected last week, as demand for gasoline surged ahead of the peak summer driving season.

US Oil Rig Count Declines

Although the number of rigs drilling for oil in the U.S. remained steady this week at 591, energy services firm Baker Hughes Co indicated that this marked the fifth monthly decline as the number inched down by one in April.

North Sea Oil Supply Drops

Additionally, loading programs showed that supply for the five North Sea crude oil grades that underpin the dated Brent benchmark is expected to average around 607,000 bpd in June, a 13% decrease compared to May’s supply of 696,000 bpd.

Technical Analysis

From a technical standpoint, WTI Oil is currently trading above its daily pivot at $73.89. However, but it has not yet reached the R1 level at $82.53. Although the long-term technical analysis suggests an upward trend, the short-term outlook indicates the possibility of weakness.

If the price manages to stay above the R1 level, it could indicate a rise in buying strength. And lead to a near-term upward trend. On the other hand, if the price stays below the R1 level, it could suggest an increase in short-term selling pressure. In this scenario, the pivot at $73.89 would be the next major target.

Since the overall trend is upward, a drop to $73.89 is likely to attract new buyers as it is considered a value level.

For a look at all of today’s economic events, check out our economic calendar.