The price of crude oil retreated from the highest level in two weeks yesterday. Prices came under selling pressure after a larger-than-expected rise in US inventories pointed to a well-supplied market, while signs of a slowdown in Japan fuelled concerns about slowing demand.
Crude oil prices fell more than 1.40% on Wednesday after data showed US crude inventories rose by 12 million barrels in the week ended February 9, well above expectations for 3.3 million barrels.
The reading was mainly driven by record high output in the US, indicating that the world’s biggest fuel consumer was still well supplied with oil.
While gasoline and distillate inventories declined, the decline was largely due to extended refinery shutdowns for maintenance. In the United States, fuel demand has weakened in recent months due to adverse weather conditions and economic pressures from high inflation and interest rates.
Japan’s GDP data showed the country unexpectedly slipped into a technical recession in the fourth quarter due to continued weakness in private consumption.
The reading was preceded on Wednesday by GDP data from the fourth quarter of the eurozone, which showed that economic activity in the bloc did not change much after the economic recession in the third quarter.
Weak economic numbers, along with recent indications that US interest rates will remain higher through 2024, fueled concerns that a cooling economy will keep oil demand subdued in the coming months.
Crude oil was also weighed down by a strong dollar, which was near a three-month high after data showed US inflation held steady in January, prompting the Federal Reserve to keep interest rates higher for longer.
The International Energy Agency is set to release a monthly report later on Thursday, which comes just days after the Organization of Petroleum Exporting Countries left its outlook for global crude demand unchanged in a monthly report. Still, oil prices were sitting on some gains over the past two weeks, aided chiefly by persistent concerns over supply disruptions in the Middle East, after an Israel-Hamas ceasefire fell through.
Technical Outlook – Crude Oil
After yesterday’s two-week highs, prices suppressed and fell 1.43% to 6397. Compared to the previous day’s close of 6490.00
Since February 5, 2024, prices have continued to rise. Prices found support at 5952 and made a two-week high of 6543.00.
On the chart above, Prices faced a huge resistance at 6550, which is a multi-day resistance. This indicates that prices may be in trouble before breaking above these levels. Or may solidify soon.
Breakdown is immediate support at 6345 below, prices could pull again to immediate support at 6230-6155.
However, if prices give a break above 6550, it could soon extend the top to 6650-6750.
General sentiment remains volatile in terms of supply and demand concern. Therefore, traders should expect a break of 6550 from new buy.
Commodity Samachar
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