Oil Price Fundamental Daily Forecast – Gains Capped by Rate Hike Worries, Growing Stockpiles

U.S. West Texas Intermediate crude oil futures are flat on Thursday as a jump in U.S. oil inventories to their highest level in months and a stronger U.S. Dollar offset the optimism that had been building over recovering Chinese demand.

At 12:17 GMT, April WTI crude oil futures are trading $78.53, down $0.16 or -0.20%. On Wednesday, the United States Oil Fund ETF (USO) settled at $68.69, up $0.93 or +1.37%.

Major Concerns:  Rising US Commercial Inventories, Entrenched Inflation, Higher Interest Rates

The major concerns that could put a lid on crude oil prices over the near-term are rising U.S. commercial inventories, potentially entrenched inflation and the uncertainty over how long the Fed will raise rates and at what level will they stop increasing rates.

Crude oil stocks in the United States rose last week to their highest level since June 2021, helped by higher production, the Energy Information Administration said. U.S. gasoline stocks also rose the week-ending Feb. 3.

Meanwhile, New York Federal Reserve President John Williams came across as hawkish on Wednesday when he said the Fed funds could reach 5.00% – 5.25%. His comments were bearish for commodities and risky assets that were supported the day before by Fed Chair Jerome Powell’s less-hawkish remarks.

Optimism over demand from China may provide some support, but the jump in demand could also keep inflation entrenched, which means rates are going to have to stay higher for longer. This will also raise the chances of a harder than expected global recession.

Daily April WTI Crude Oil Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending lower.

A trade through $72.64 will signal a resumption of the downtrend. A move through $82.69 will change the main trend to up.

The minor trend is up. It changed to up when buyers took out the last swing bottom at $78.28 on Wednesday. This shifted momentum to the upside.

The minor range is $82.89 to $72.64. The market is trading on the strong side of its pivot at $77.77, making it support.

On the upside, the nearest resistance is a retracement zone at $79.76 – $81.85. On the downside, minor support is another pivot at $75.84.

Daily April WTI Crude Oil Technical Forecast

Trader reaction to $78.69 is likely to determine the direction of the April WTI crude oil market on Thursday.

Bullish Scenario

A sustained move over $78.69 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at $79.76 – $80.01. The latter is a potential trigger point for an acceleration into the Fibonacci level at $81.85.

Bearish Scenario

A sustained move under $78.69 will signal the presence of sellers. This could lead to a test of $77.77.

A failure to hold $77.77 will indicate the selling is getting stronger with the next target a minor pivot at $75.84. This is the last potential support before the $72.64 main bottom.