Weekly Crude Oil Inventories Report
Fifth Straight Weekly Rise in US Stocks As Production Hits Record Highs
Crude price remained buoyant once again this week, despite the latest industry data reflecting a further rise in inventories. The weekly report from the Energy Information Administration showed that in the week ending February 15th, US crude inventories rose a further 3.7 million barrels. This increase, which was above the expected 3-million barrel increase, marks the fifth consecutive weekly rise in stockpiles.
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Fifth Straight Weekly Rise
The data is worrying for bulls as it was precisely this type of steady build in inventories which saw prices plummeting last year. However, for now, it seems the OPEC production cuts are boosting the market.
Production cuts have now been in effect since the start of the year among OPEC and a group of allied nations led by Russia. Recently, Saudi Arabia, the biggest producer in the cartel, announced its plans to reduce output further over March. They will do this in a bid to fight subdued prices.
US Output Hits Record High
News of Saudi Arabia’s initiative will not be welcomed by President Trump. The US leader has consistently criticized OPEC. He has also personally called on Saudi Arabia to increase its oil output in a bid to keep prices lower.
Indeed, in the US, crude production hit fresh highs this week. Production moved up to 12 million barrels per day for the first time in history. So, for now, it seems that oil prices are caught between the East’s efforts to lower output and the West’s efforts to increase it.
Geopolitical Tensions Keep Oil Supported
Recent geopolitical tensions have also helped boost oil prices this week. The ongoing US sanctions on Iran and Venezuela have continued to keep supply from these two producers limited. However, this week, the main focus was Russian president Putin’s threat to the US.
Speaking in a national address, the Russian leader warned America that if it deploys new missiles systems in Europe, Russia will respond in kind. Putin said that such a move by the US would be considered a “serious threat” by Russia. The comments follow the US pulling out of the 1987 NATO arms treaty which ended the cold war.
The move by the US has been heavily criticized by political figures, analysts and commentators on both sides. Many feel that leaving the treaty has now essentially started a new arms race.
While this development poses a serious risk to the safety of nations, it is good news for oil. This is because the commodity is boosted by the expectation of demand linked to such conditions as well as the threat of supply reduction.
The rally in oil prices this week has taken price back above the 38.2% retracement from last year’s highs. While above here, focus will be on a test of the next structural resistance at the 58.030 level. This comes in just below the 50% retracement level at 59.70.
There is plenty of structural resistance overhead for oil with a host of swing lows made during last year’s bull run. This means that any move higher from here is likely to be labored. To the downside, support remains at the 50.30 region.