Oil prices are flat even after the rise in US inventories

Oil prices remained flat on Thursday and WTI price oscillated around $68.5 per barrel. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $73.0 per barrel.

Oil prices exhibited high volatility after the announcement of the US election result last week but have steadied since, as markets had time to digest the US election outcome. Trump’s anti-renewable energy policies are raising demand for fossil fuels, but the President-elect has already expressed his intention to start more drilling for oil in the US. Republicans secured full control of the US Government on Thursday, allowing Trump’s administration to pass laws more easily. After winning the US Presidency last week and the majority in the US Senate earlier this week, Republicans won control over the House of Representatives on Thursday. 

US crude oil inventories released on Thursday showed a surprising build in US crude stockpiles, putting pressure on oil prices. The US Energy Information Administration reported that weekly crude stocks rose by 2.4M barrels for the week to November 8, exceeding expectations of growth by 0.4M barrels, and following a rise of 2.1M barrels the week before. 

The Organization of Petroleum Exporting Countries (OPEC) released its monthly report on Tuesday. OPEC revised its global Oil demand forecast downward for the fourth month in a row. OPEC announced earlier this month that it would extend its output cuts of 2.2 million barrels per day into December. The organization had already delayed output rises in October due to low demand and weakening oil prices. 

Geopolitical concerns are easing, putting pressure on oil prices. According to a report by Bloomberg, President-elect Donald Trump is putting pressure on his Russian counterpart for a solution to the crisis in Ukraine. Reports that Trump has urged Russian President Vladimir Putin to deescalate tensions in Ukraine put pressure on oil prices on Monday.

Concerns of a broadening conflict in the Middle East have boosted oil prices in the past year. The conflict in the Middle East, however, has been raging for over a year without significantly affecting oil supply and distribution, and markets are starting to ignore this risk, putting pressure on oil prices.

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points last week to a target range of 4.50% to 4.75%. The Fed had already launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. 

Fed Chair Jerome Powell has stated that the progress of disinflation is steady, and the labor market is strong, permitting a shift towards a more neutral monetary policy. Odds of another rate cut in December shot up to 90% after the release of the US inflation report on Wednesday but dropped back to 75% on Thursday.

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Written by:
Myrsini Giannouli

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