Crude Oil Up On Positive Demand Outlook and Inventory Decline

Summary:
• Oil prices have inched up after OPEC retained its 2.25 mbpd demand outlook for 2024, as API reported a substantial decline in US stockpiles.

Crude oil prices were up early on Wednesday, as the market reacted from the latest oil market outlook reports. Brent crude was up by 0.51%, trading at $82.73 per barrel at 9.20 am GMT, and WTI followed a similar pattern, rising by 0.40% to trade at $78.29. The clawback by oil is driven by the latest reports released by OPEC+, Energy Information Administration and American Petroleum Institute.

OPEC+ stuck to its previous demand outlook, stating that it expected the daily demand to rise by 2.25 million barrels for the year. Furthermore, the oil cartel based its assessment on a positive global economic outlook, whereby it projects a 2.8% growth in 2024. According to OPEC, leading oil consumers, United States, China and India will likely beat growth projections.  Notably, OPEC+ members raised their output by 203k barrels per day in February, despite the current voluntary cuts. Therefore, the oil cartel still has some headroom to use production cuts to spur up oil prices.

Meanwhile, the EIA raised its production forecast for the year from 170k barrels to 260k barrels per day. This is marginally higher than OPEC’s raised output in February, tilting the scales in favour of the oil cartel’s forecast. Elsewhere, American Petroleum Institute (API) reported a decline in US crude stocks by 5.521 million barrels, providing some tailwinds for the commodity.

Focus now shifts to Wednesday’s EIA official inventory figures, which are forecast to show a decline from 1.36 million barrels to 900k barrels for the week ended March 8. Down the line, more volatility could come in when International Energy Agency will release its monthly report on Thursday.

Technical analysis

Crude oil price has its pivot at 78.16, and the RSI indicator favours the upside. If the buyers maintain control above 78.16, the commodity will likely meet the first resistance at 78.62. However, extended control by the bulls will breach the resistance, pushing the price to test the next resistance at 78.87. However, if the price action comes under 78.16, the momentum will favour the sellers, who will target breaking the 77.62 support. A continuation of bearishness at that point could see second support established at 77.63.