Crude Oil, US Dollar, API, EIA, Inventory, Prompt Spread, Technical Outlook – Talking Points
- Crude oil prices are moderating after a multi-day rally
- EIA inventory data expected to show stockpile build
- Prices fall to the psychologically important 100 level
WTI crude oil and Brent oil prices are slightly lower in Asia-Pacific trading, signaling the potential end of a multi-day rally that sent WTI back above the $100 per barrel mark. A pullback in the US Dollar has provided a tailwind to prices, reducing the costs of foreign buyers to transact in the USD-denominated commodity. However, the US Dollar is softer, and equity indexes across APAC are rising.
Traders are likely scaling out of oil ahead of tonight’s US inventory report from the Energy Information Administration (EIA). Traders expect a 748k barrel build in crude oil inventories for the week ending July 15, according to a Bloomberg survey. Gasoline and distillate stocks are seen rising as well. The American Petroleum Institute reported a 1.86 million barrel increase for the week ending July 15, beating a 333k barrel build that analysts expected.
A larger-than-expected increase may weigh on prices, but the downside is likely limited as storage levels remain extremely tight. Stockpiles at Cushing, Oklahoma—the primary WTI delivery and pricing point—are near critically low levels, with only 21.6 million barrels in storage. The storage hub needs around 20 million barrels for normal operations, which, if reached, could send prices much higher. Overseas demand has eased in recent weeks, which should help stem the flow of oil going to the Gulf Coast for shipment.
However, overall demand remains healthy. That is evidenced by the strength in the WTI prompt spread, which measures the price difference between the current and next month’s contract (see chart below). With storage levels near historically low levels, prices likely have limited room to fall even if tonight’s EIA data turns out to be bearish. That said, prices may rally if the data shows a surprise drop in stockpiles, given the fundamental backdrop.
WTI Crude Oil Technical Outlook
WTI prices are trading just above the psychologically important 100 handle after prices fell short of climbing above the 20-day Simple Moving Average (SMA). A drop below 100 could push prices lower to retest the 200-day SMA, which supported prices last week. MACD made a cross above its signal line, a bullish sign, although the RSI oscillator failed to climb above its 50 mid-point.
WTI Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter