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27 June 2024 | FXGT.com

WTI Crude Balances US Inventory Rise with Geopolitical Risk Factors

  • Price Movements: Crude oil future prices dropped to below $80.50 during the Asian session on Thursday, retreating from a two-month high of $81.90 reached on Tuesday. However, they rebounded back above $81.00 during the European session. The initial decline was prompted by unexpected U.S. crude stockpile data, indicating potential demand weakness.
  • U.S. Inventory Data: The U.S. Energy Information Administration (EIA) reported an unexpected increase of 3.591 million barrels in crude oil inventories for the week ending June 21, contrary to the anticipated 3.000-million-barrel reduction. This increase has raised concerns about weakening demand.
  • US Crude Imports Surge: U.S. crude oil imports soared to their highest level in nearly two years during May, reaching 3.1 million barrels per day. This surge was driven by refiners purchasing crude from Canada and Latin America to produce fuel for the summer driving season. Import levels remained strong in June, averaging around 2.9 million barrels per day.
  • Geopolitical Tensions: Ongoing geopolitical tensions, particularly in the Middle East and Ukraine, continue to influence oil prices. Israeli and Russian military activities have added to market volatility, although their direct impact on oil supply remains uncertain. Escalating tensions between Israel and Hezbollah have raised fears of a broader conflict involving major oil producer Iran. These geopolitical risks are supporting oil prices despite rising U.S. inventories.
  • Market Volatility: The oil market remains volatile, balancing between the bearish effects of rising U.S. inventories and potential supply disruptions due to geopolitical tensions. Oil prices have been contained within a sideways range over the past week, with support at $80.20 and resistance at $82. This range has persisted amid fluctuating market sentiment and mixed signals regarding demand
  • Monthly Gains: Despite the recent sideways price action, oil prices are up by about 5.5% for the month of June. Traders have incorporated a higher risk premium for crude due to geopolitical tensions in Russia and the Middle East. Additionally, ongoing supply cuts by OPEC and its allies are expected to support prices in the coming months.
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