Oil Edges Up As Projections Allay Fears of Oversupply

Summary:
• The EIA revised downwards its 2024 production projections and the American Petroleum Institute says inventories rise was below expectations.

Crude oil prices edged higher on Wednesday afternoon in the London session, spurred on by less-than-expected US oil inventory figures. Furthermore, the commodity got support from a consolidating US dollar, which had seen the DXY index lose -0.12% to stand at 104 at the time of writing. WTI contracts were trading at $76.90 per barrel at 15:05 GMT after gaining +0.70%.

The Energy Information Administration (EIA) is scheduled to release inventory data later today. However, the market has already reacted to yesterday’s unofficial release by American Petroleum Institute, which showed that US oil inventories rose by 0.674 million barrels, much lower than the forecast 2.133 million barrels.

Furthermore, the EIA has revised downward its projections for daily oil production in its Short-Term Energy Outlook released yesterday. The agency estimates that production will grow by 170,000 barrels per day in 2024, down from the earlier projection of 290,000 barrels per day. Coupled with the scheduled cuts by OPEC+, this has strengthened a bullish view for the commodity’s prospects this year.

Meanwhile, news of a possible ceasefire between Israel and Hamas in the Middle East has done little to disrupt oil price gains. Investors are generally of the opinion that the war has not affected supplies significantly. Similarly, attacks by Houthi Rebels on the Red Sea supply routes have not dented oil’s resilience. 

For now, focus shifts the EIA’s impending inventory data, which is expected to print at 1.7 million barrels. However, a figure above the consensus estimate could not only come as a surprise, but also solidify concerns that the market could be facing an oversupply.

Technical Analysis

The RSI is bullish and supports further upward action. With the pivot at $72.85, the bulls will likely push towards $74.40, and a breach beyond that level could push the price further up to test $75.05. A price breach below $72.85 will support a bearish action, and the commodity will likely find first support at $72.40. A further shedding of momentum could move the support to $72.05.

WTI Crude 30 minute chart