Crude halted its gains and fell nearly half a percent yesterday. Because the effects of the Federal Reserve’s restrictive policies outweighed the supply problems of geopolitical unrest. Hot US inflation data has led markets to expect higher interest rates from the Federal Reserve this year, which would weigh on the outlook for global energy demand and boost the dollar, hurting import demand from foreign consumers.
Also contributing to the decline, EIA. data showed that US crude inventories rose by 5.841 million barrels last week, the most in two months, and beat estimates of 2.366 million barrels.
Still, negotiations between Israel and Hamas continued to yield no result, paring hopes of an incoming ceasefire.
Additionally, US intelligence officials warned Israel of imminent missile or drone strikes from Iran, fuelling concerns of deeper conflict and a potential impact on crude oil supply.
Adding to this, a power outage shut multiple fuel-producing units at Motiva Enterprise’s massive 626,600 barrel per day Port Arthur, Texas facility on Wednesday. Idling and stabilizing the multiple units shut by the power outage will take up to 35 hours, Motiva said in a regulatory filing, without specifying a timeline for restarting the units.
Prolonged refinery outages typically dampen crude oil demand and drive more crude oil into inventories.
It will be difficult to maintain Brent above $90 a barrel in the second half of the year without actual supply disruption associated with geopolitical events, said global energy strategist Vikas Dwivedi of Macquarie.
Further, Minutes from the U.S. Federal Reserve showed officials worried that progress on inflation might have stalled and a longer period of tight monetary policy would be needed..
In Europe, central bank officials kept borrowing costs at a record high as expected, but signaled the ECB may soon cut rates. Slower rate cuts could crimp oil demand, yet OPEC stuck to its forecast for relatively strong global demand growth in 2024.
Technical Outlook – Crude Oil
Crude oil prices retreated by 0.54% and settled at 7120 compared to previous day’s close of 7159.00.
Since 4 April 2024, prices consolidating in between the range of 7060-7200.00. And this consolidation could be continuing unless it gives either side break.
On the downside, immediate support is seen at 7060 and break below it prices could drop towards 7000-6950.00
On the upside, a break above 7200 is expect to gain further. Prices may test next resistance 7280-7350.00
Hence, prices expect to consolidate above its immediate support unless it gives a closing below 7060.
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Commodity Samachar
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