- WTI has been on the back foot for most of the session, slipping under $64.00 in recent trade.
- The latest EIA inventory report triggered some selling, but traders are now looking ahead to the FOMC.
Crude oil continues to trade with a negative bias, as has been the case since the start of the week. Front-month WTI futures prices were unable to hold above the $65.00 level for very long during Wednesday’s Asia Pacific session and by the time European market participants arrived, selling pressure had taken over again.
WTI is now trading just under the $64.00 level, only slightly above weekly lows in the $63.60s, down about 90 cents or 1.4% on the day. If bearish momentum continues, a test of last week’s low at just above $63.00, which also coincides with WTI’s 21-day moving average at just under $63.00, seems likely.
Driving the day
The recently released official US EIA crude oil inventory report has helped to push crude oil prices back towards lows of the day under $64.00; though headline crude oil stocks saw a smaller than expected build of 2.396M (versus forecasts for a build of 2.964M), this seems to have disappointed markets after Tuesday’s weekly private API inventory data showed a 1M barrel draw – perhaps some traders had been expecting the official numbers to follow API’s estimate and these traders would have been disappointed. Meanwhile, gasoline and distillate inventories both posted surprise builds.
However, crude oil markets had already been trading on the back foot prior to the release of EIA inventories; crude oil markets seem to be being dragged lower by downside in US equity markets, which seem to be dropping as a result of a ramp-up in US government bond yields to fresh cycle highs ahead of the release of Wednesday’s FOMC monetary policy decision, accompanying updated dot-plot and economic forecasts and post-meeting press conference with Fed Chair Jerome Powell.
In terms of crude oil-specific news, there has not been too much to get excited about. The EU continues to head back towards lockdown, with France set to soon announce stricter measures and Poland recently announcing a new lockdown. Meanwhile, the EU/AstraZeneca vaccine debacle continues to slow the bloc’s vaccine rollout and this is pushing back the timeline towards herd-immunity, which has not been taken particularly well by the crude oil complex. Separately, the International Energy Agency (IEA) held their forecast for global oil demand growth for 2021 steady.
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