Crude oil ended at its highest level of the year on the NYMEX on Wednesday, with fears of tighter global oil supply and slowing US inflation outweighing a slight swelling of crude inventories in the United States.
Today, let’s analyse the various price drivers!
United States Crude Oil Inventories
The market seems to have ignored the weekly U.S. Crude Oil Inventories report as it was mixed.
Admittedly, it showed a small, unexpected increase in crude oil stocks (over half a million barrels) in the country due to a drop in exports, a slight increase in production, a small decline in refinery activity and the sale of 1.6 million barrels of strategic petroleum reserves (SPR).
SPRs are currently at their lowest level since the early 1980s.
However, the report also highlighted a decline in oil demand.
Oil Price Latest Release
Oil Price Chart
Market players are instead focusing on global crude supply, in particular continuing to digest the announcement by the Organization of the Petroleum Exporting Countries and their allies (OPEC+) of further cuts in their oil production.
At the same time, various sources show that Russian exports have fallen significantly while exports from northern Iraq to Turkey remain stuck in a legal battle.
United States Gasoline Inventories
U.S. gasoline inventories were following the same trend as crude oil stocks:
U.S. Gasoline Inventories Latest Release
U.S. Gasoline Chart
In addition, U.S. inflation (CPI) figures – which indeed slowed to 5% year on year in March, thus settling at their lowest level in almost two years – also play a role.
United States Consumer Price Index (CPI) Year-on-Year (YoY)
US CPI YoY
US CPI YoY Chart
This announcement on Wednesday could therefore lead some investors to believe that the US central bank is at the end of its rate hike cycle.
Thus, lower interest rate expectations – reducing fears of recession and at the same time helping to support the prices of dollar-denominated assets, such as crude oil – also ward off fears of a recession, which could weigh on energy demand.
Technical Charts
US Dollar Index Daily Chart
Light Crude Oil Futures Weekly Chart
Crude Oil Futures Daily Chart
Crude Oil Futures 4Hr Chart
