Oil prices edge lower on rising US stockpiles

Oil prices edged lower on Thursday, with WTI price dropping below the $78.0 per barrel level. If oil prices drop, they may encounter support near $71.4 per barrel, while resistance may be found near $80.8 per barrel.

Oil prices rallied this week on the seasonal oil demand outlook. Increased oil demand outlook in the summer months is propping up oil prices. Oil prices dipped on Thursday, however, burdened by rising US stockpiles. US crude oil inventories showed that US crude stockpiles exceeded expectations. The US Energy Information Administration reported a weekly crude stockpile rise of 3.7M barrels for the week to June 7th, against expectations of a 1.2M barrel draw and following a build-up by 1.2M barrels the week before. 

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve kept interest rates unchanged at its policy meeting on Wednesday, within a target range of 5.25% to 5.50%, as expected. The US Fed is keeping interest rates at a 23-year high, restricting economic growth and limiting the oil demand outlook as a result. 

US CPI data released on Wednesday showed that disinflation in the US is finally progressing, however, raising Fed rate cut expectations and boosting oil prices. Headline inflation eased to 3.3% year-on-year in May from 3.4% in April, dropping below expectations of a 3.4% print. Odds of a rate cut in September rose above 60% on Wednesday on easing US inflationary pressures.

Odds of Fed rate cuts have become more moderate, putting pressure on oil prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation. 

OPEC+ has decided to extend most of its voluntary production cuts into 2025 to boost oil prices. OPEC, however, announced that it would gradually phase out oil production cuts and laid out plans for restoring production levels within 2025. 

Supply concerns provide support for oil prices, as the crisis in the Middle East threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread further in the Middle East, affecting oil supply and distribution. 

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: