- Oil almost completely recovers from its intraday losses following the release of the EIA report.
- WTI Crude Oil remains near $78 following a drop to $76.76 earlier.
- The US Dollar Index edges higher with support from the Japanese Yen and prevailing market uncertainty.
The West Texas Intermediate (WTI) crude prices in the United States are getting close to reaching their lowest point in nearly two months, and oil prices are on track to recover to $78 after experiencing a significant drop. According to a report that was published by Bloomberg on Wednesday, the markets did not react favorably to the news that Iran plans to increase its daily production by an estimated 300,000 to 400,000 barrels this year.
The Iranian Oil Minister Javad Owji made the announcement on state television, and it will have significant repercussions for the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC), among which the extension of production cuts is the primary agenda item.
During this time, the United States Dollar Index (DXY) has been steadily climbing throughout the week, and it has now recorded gains for the third day in a row, in conjunction with the United States Dollar to Japanese Yen pair.
Over the course of the last two weeks, the Japanese Yen (JPY) has already reversed fifty percent of the gains it made during the interventions executed by the Japanese government. There is a possibility that the widely held optimistic sentiment regarding the United States Dollar (USD) could potentially exert downward pressure on the prices of crude oil.
On the day that this article was written, the price of West Texas Intermediate (WTI) crude oil was $77.83, while the price of Brent crude was $82.09.
Latest Oil Market News and Events: EIA Figures Show a Decline
- This week’s Crude Stockpile numbers were released by the Energy Information Administration (EIA) at 14:30 GMT. The previous report showed a stockpile of 7.265 million barrels and indicated a decrease of 1.326 million barrels.
- According to a recent report from the Energy Information Administration (EIA), the Oil market is projected to maintain a state of equilibrium until 2024. The EIA highlights the role of non-OPEC countries in compensating for OPEC’s production cuts, ensuring a balanced market, as per Reuters.
- In a recent note, Bloomberg Intelligence reporters Will Hares and Salih Yilmaz highlighted the potential for OPEC+ (Organization of the Petroleum Exporting Countries and allies) to extend its production cuts. They pointed to the significant drop in oil prices, which fell from $87.12 on April 5 to $77.01 on Wednesday.
A Short Drawdown Does Not Always Indicate a Significant Reversal
Oil prices are continuing to decrease as there is no sign of any disruptions in oil production from the Middle East. Traders appear to be growing weary of factoring in an additional cost for a situation that has yet to occur. As a result, there is a noticeable surrender in the price of oil, with only $75.28 remaining as a steadfast level of support, preventing oil from declining to $70.00.
However, there is a possibility of a reversal in the situation once Oil prices bounce back above $78.07. This could be supported by the 100-day Simple Moving Average (SMA) and the upward trend line from December, which are both indicating a positive direction.
Looking ahead, it’s worth keeping an eye on the 200-day SMA at $79.76 and the 55-day SMA at $81.12 as potential areas where some investors may decide to take profits. In the foreseeable future, $87.12 continues to be a significant level on the positive side.
Unfortunately, the crucial level at $75.28 represents the final barrier that could potentially halt this downward trend. If this level fails to hold, anticipate a rapid selloff towards $72.00 and $70.00. This would imply that any progress made in 2024 would be completely erased, and there is a possibility that Oil may reach the low of $68 seen on December 13.