Oil prices dip on US stockpile build

Oil prices dipped on Wednesday, with WTI price dropping to the $76.5 per barrel level. If WTI price declines, it may encounter further support near $75.0 per barrel, while resistance may be found near $84.0 per barrel.

Oil prices dropped after the Energy Information Administration released US crude oil inventories on Wednesday. US crude oil stockpiles increased by 3.6M barrels for the week to November 10, beating estimates of a 2.5M growth.

OPEC released its monthly report on Monday, stating that the oil demand outlook is not waning and providing support for oil prices. According to the report, oil market fundamentals remain robust and oil demand in the US and China has not weakened.

OPEC+ kept its output policy unchanged at its latest meeting, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. Russia and Saudi Arabia recently reaffirmed their commitment to these voluntary supply cuts. Many market analysts even predict that the rate cuts will be extended into the first quarter of 2024. Bloomberg reported on Wednesday that Russia will cut its crude oil export duty by 5.7% for December, citing the Russian Finance Ministry. Oil prices, however, continued to decline, even on concerns of limited supply. 

Oil prices have been supported by geopolitical risks within the past month. The crisis between Israel and Hamas continues, propping up oil prices. Especially fears of a potential Iranian involvement are buoying oil prices. Fears that the war in Israel would disrupt oil supply are easing, however, causing oil prices to slip. The crisis seems to be contained so far and risks of the war spreading in the region abate. 

The release of the US CPI report on Tuesday caused a temporary uptick in oil prices but oil prices suffered a correction immediately after and failed to form an uptrend. 

Oil prices are kept in check by a strong US dollar and high-interest rates. Most major central banks, however, are hitting pause on rate hikes, boosting oil prices. FOMC members have voted to keep interest rates unchanged at a target range of 5.25% to 5.50%. 

The Fed’s approach remains largely data-driven and will depend on how fast inflationary pressures may ease in the next months. After US headline inflation surprised on the downside on Tuesday, market expectations of future rate hikes went down to zero. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

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Written by:
Myrsini Giannouli

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