- WTI fell for a fourth consecutive session but remained supported above $64.00 amid a dovish Fed.
- Vaccine rollout concerns continue to weigh and the EMA’s verdict on the AZN vaccine on Thursday will be worth watching.
Wednesday marked a fourth consecutive day of losses for crude oil markets, with front-month futures contracts for the American benchmark for sweet light crude oil (WTI) dropping another 40 cents to close the day just under $64.50. Pricing once again attracted decent buying interest under $64.00; the $63.00-$64.00 area has been a significant area of support/resistance since the end of February. A break below this area could beckon renewed selling pressure, though prices would also need to contend with support in the form of the 21-day moving average which currently sits at $63.00. Futures trade has now halted and will resume at 22:00GMT.
Driving the day
A more dovish than expected outcome at Wednesday’s FOMC meeting helped to lift crude oil markets from lows; the Fed’s new dot-plot was more dovish than expected and that, combined with typically dovish policy guidance in the Fed’s statement and from Fed Chair Jerome Powell in the press conference, helped risk appetite recover sharply in the second half of US trade.
But the modest late US session recovery was not enough to bring WTI back into the green. Prices had been weighed earlier in the session in wake of the latest weekly US EIA crude oil inventory report; 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.
In terms of crude oil-specific news, there was not too much to get excited about on Wednesday. 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. Note that France, Germany, Spain and Italy are all poised to rapidly restart their rollouts of the AstraZeneca vaccine if the European Medicines Agency judges the vaccine to be safe on Thursday following its recent review (this could be crude oil positive). Separately, the International Energy Agency (IEA) held their forecast for global oil demand growth for 2021 steady.
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