Crude Oil Prices Fall on Large Stockpiles Build, OPEC+ Honors Output Cuts
CRUDE OIL PRICE OUTLOOK:
- API reported a 4.32-million-barrel increase in crude inventories for the week ending April 23rd
- OPEC+ scrapped a meeting scheduled today as the oil cartel made no change to its tapering plan
- The DXY US Dollar index rebounded ahead of the FOMC press release, weighing on commodity prices
Crude oil prices pulled back modestly during Wednesday’s APAC trading session after gaining 1.8% overnight. A surprisingly large build in crude stockpiles weighed on oil prices, according to a report from the American Petroleum Institute (API). Inventories surged 4.32 million barrels for the week ending April 23rd, compared to a baseline forecast of a 0.659-million-barrel rise. In the previous week, 0.436 million barrels were added to the stockpiles, versus a forecasted decline of 2.86 million barrels.
Recent inventory reports clouded the energy demand outlook alongside viral resurgence in some of the world’s largest oil importers. Prices stayed composed however, as the OPEC+ cancelled a ministerial meeting scheduled on April 28th, leaving the current output cut plan unchanged (chart below). This suggests that the oil cartel remains confident about the demand outlook as economy in the US and China rebounded strongly. This helped to offset concerns about growing coronavirus cases in India, Japan and Brazil. The next OPEC+ meeting is scheduled on June 1st.
Production Hike Scheduled at April 1st OPEC+ Meeting
Encouragingly, the number of new Covid-19 cases in India declined for the first time in seven days, falling from 352,991 to 323,023. The number of new infections in Japan showed signs of stabilizing too. The country imposed new state-of-emergency measures in Tokyo, Osaka and two other prefectures on Sunday in an attempt to curb the spread of the virus. India and Japan are the world’s third and fourth largest oil importers respectively. Therefore, pandemic situations in these countries will be closely scrutinized by oil traders for clues about shifts in underlying demand.
Daily Change in Covid-19 Cases – India and Japan
Looking ahead, the Energy Information Administration (EIA) will report weekly inventories data later today. Markets anticipate a 1.00-million-barrel draw in America’s stockpiles for the week ending April 23rd. A larger-than-expected fall may serve to underpin crude oil prices, whereas a smaller draw or rise would likely do the reverse (chart below).
Traders will also keep an eye on the FOMC press release, which may have a large impact on the DXY US Dollar index. Market participants are watching for any sings of the central bank pulling back its asset purchasing program as the economy gathers strength. A hawkish-biased statement from Fed Chair Jerome Powell will likley strengthen the greenback and weigh on commodity prices. The reverse is true if the central bank maintains its accommodative stance.
Source: Bloomberg, DailyFX
Technically, WTI appears to haveformed a “Double Top” chart pattern after hitting a strong resistance level at US$ 63.83 on the four-hour chart. A “Double Top” pattern usually occurs at the end of a bull trend and signals a trend reversal. Prices rebounded and breached above the 50% Fibonacci retracement, opening the door for further upside potential with an eye on $ 63.83 – the 61.8% Fibonacci retracement level.
WTI Crude Oil Price – 4 Hour Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.