Crude oil prices hover cautiously as market weighs Middle East situation and EIA inventory report
After rising for two consecutive days, U.S. WTI crude oil futures and Brent crude oil futures hovered near flat trading at the end of the Asian market on Wednesday (February 7). Markets were weighing reports of geopolitical risks in the Middle East and rising U.S. oil inventories. Today’s trend will be extremely important for both bulls and bears.
U.S. Oil and Brent crude oil closed yesterday at $73.44/barrel, up 0.9%, and $78.77/barrel, up 1.08%. The recent strength of oil prices is due to technical support and turmoil in the Middle East.
1. Technical aspect
As Huitong Finance reminded us a few days ago, we need to pay attention to signs of long-short competition when oil prices are on the lower track of the recent upward channel. In the past two days, oil prices have shown signs of firming or rebounding. At present, it seems that this lower track support has played an important role in the market. However, since there has not yet been a big positive line, it shows that the market will be very sensitive to bad news.
(Figure 1: Technical analysis of daily chart of main U.S. oil futures, source: Yihuitong)
(Figure 2: Technical analysis of daily chart of Brent crude oil main futures, source: Yihuitong)
2. Pay close attention to the situation in the Middle East
Traders have been keeping a close eye on developments in the Middle East, particularly attacks on shipping by Iran-backed Houthi rebels in the crucial Red Sea.
U.S., Qatari and Egyptian mediators are preparing to push through diplomatic channels to bridge differences between Israel and Hamas over a Gaza ceasefire plan, after Hamas responded to an offer to extend the ceasefire and release hostages.
3. The EIA monthly report predicts medium and long-term output is stable, focusing on EIA tonight
The U.S. Energy Information Administration (EIA) said in its Short-term Energy Outlook (STEO) report on Tuesday that U.S. oil production in February will not break the record of more than 13.3 million barrels set in December until February 2025.
The EIA will also lower its forecast for U.S. oil production growth in 2024 by 120,000 barrels per day to 170,000 barrels per day. Last year, production surged by 1.02 million barrels per day.
In the medium to long term, U.S. oil production growth is expected to remain basically stable until 2025, thus easing concerns about oversupply.
Data released at 05:30 Beijing time this morning showed that U.S. API crude oil inventories unexpectedly increased by 674,000 barrels in the week ended February 2. The market had previously expected a decrease of 2.133 million barrels, and the previous value decreased by 2.493 million barrels.
The US government’s oil inventory data – US EIA crude oil inventory and other data will be released at 23:30 Beijing time on Wednesday. U.S. crude oil inventories are expected to rise by 1.895 million barrels in the past week as production recovers from cold and icy weather and refineries begin maintenance.
If tonight’s data shows that inventories are higher than expected, it will put pressure on oil prices. If oil prices can show a V-shaped trend after this data, it will be a bullish signal. However, if it closes sharply negative today, it may indicate that the support on the lower track of the daily rising channel may be difficult to hold.
(Figure 3: API crude oil inventory and EIA crude oil inventory indicators on February 7, Beijing time, source: Huitong Financial Calendar)
At 13:45 Beijing time, the main US WTI crude oil price was US$73.38/barrel, and the main Brent crude oil price was US$78.62/barrel.
2024-02-07 05:47:00
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