Crude oil plunges 4% as BOE interest rate hikes negated the impact of lower US oil supplies
Crude oil posted its biggest intraday fall since 30 May 2023. A bigger-than-expected Bank of England rate hike prompted worries about the economy and fuel demand that outweighed support from a surprise draw in U.S. oil supplies.
The Bank of England raised interest rates by a bigger-than-expected half a percentage point to fight stubborn inflation. It was the central bank’s 13th straight rate hike. Higher interest rates could slow economic growth and reduce oil demand.
In supply, U.S. crude inventories fell by 3.8 million barrels in the last week to 463.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 300,000-barrel rise.
U.S. gasoline stocks rose by about 480,000 barrels in the week to 221.4 million barrels, the Energy Information Administration (EIA) said, compared with analysts’ expectations in a Reuters poll for a 100,000-barrel rise.​
Distillate stockpiles, which include diesel and heating oil, rose by about 430,000 barrels in the week to 114.3 million barrels, versus expectations for a 700,000-barrel rise, the EIA data showed.
Today, PMI numbers of Europe, UK and US will drive the direction. Further, Â Chinese factory activity data is due next week, which could indicate the strength of China’s economy.
Crude oil prices retreated from the high of 5966, and plunged more than 4% yesterday. Prices settled at 5705, witnessing the biggest single-day fall since 30 May 2023.
Technical Outlook
Crude oil prices retreated from the high of 5966, and plunged more than 4% yesterday. Prices settled at 5705, witnessing the biggest single-day fall since 30 May 2023.
On the above chart, prices failed to break pennant resistance 5995 and dropped towards crucial support. On the downside, immediate support is seen at 5590 below it 5500.00.
Further, 5490 will act as decisive support and a break and sustain below 5490 will create a probability for a new crunch. As per the above pattern Crude oil prices may take a 3%-4% correction in days to come. That could be 5400-5350.00.
Alternatively, prices may rebound towards 5860-5880 which may attract selling pressure again. The trend may remain negative unless prices give a closing above 5995-6005.
On the other hand, only above will expect to test 6080-6180 next resistance.