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Crude Oil Prices Eye EIA Inventory Data as China Fights Covid

Crude Oil Prices Eye EIA Inventory Data as China Fights Covid

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Crude Oil, WTI, Growth Fears, Inventory, EIA, OPEC, Technical Outlook - Talking Points

  • Crude oil prices plummet as traders price in higher odds of a global recession
  • EIA inventory data is in focus after the API reported a surprise build in stockpiles
  • Prices find support near the March low after breaking below the 100 mark overnight
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Crude oil prices are trading slightly higher through Asia-Pacific trading after WTI crude and Brent crude benchmarks fell overnight. Traders are pricing in higher odds for a global recession, putting oil’s demand prospects in question.

Economic growth expectations have weakened considerably in recent months, driven primarily by central bank tightening amid persistently high inflation. A recent flare-up of Covid cases in China has brought a familiar headwind back into the market. Shanghai reported 55 new Covid cases for Tuesday. That is down from 59 on Monday, an encouraging drop as the city conducts mass testing.

Still, it is too soon to confidently predict the virus’s course, and many fear that the city may experience another lockdown, which would come just weeks after the city ended a two-month lockdown. Crude oil prices may react negatively if daily case figures turn higher. Meanwhile, the uncertainty around the situation may keep pressure on prices.

The Organization of the Petroleum Exporting Countries (OPEC) released its first forecast for 2023 on Tuesday, showing that the cartel expects demand to increase by 2.7 million barrels per day (bpd). The United States has called on OPEC to pump more oil to combat high gasoline prices, but the cartel is already pumping nearly as much as it can. Saudi Arabia and the UAE have around 1.8 million barrels per day of spare capacity, with other members pumping at or near full capacity.

The American Petroleum Institute (API) reported a 4.76 million barrel build in crude oil stocks for the week ending July 8. That was well above the 1.93 million barrel draw that analysts were expecting. The Energy Information Administration’s data is due out tonight. Traders see the EIA reporting a 468k barrel draw. A surprise build may cause a negative price reaction in WTI.

A surging US Dollar is another factor weighing on crude oil prices. The DXY Index is up over 1% this week, benefiting from a weaker Euro and safe-haven flows. Tonight’s consumer price index (CPI) may cause DXY to rise further if the data increases rate hike bets for the Federal Reserve. The Bloomberg consensus estimate sees an 8.8% y/y increase for June CPI.

Crude Oil Technical Outlook

Crude oil prices are slightly higher after finding support at the March low (93.56). The overnight move pulled prices through the psychologically important 100 level. A break below 93.56 would likely induce a deeper selloff. A bearish crossover between the 20- and 100-day Simple Moving Averages sent a bearish signal for the near-term outlook.

Crude Oil Daily Chart

crude oil chart

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for

To contact Thomas, use the comments section below or @FxWestwater on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.