USOIL Subdued, but Helped by Tight US Inventories & Aramco CEO Capacity Warning
USOil Analysis
Yesterday's data by the US Energy Information Administration (EIA) showed that commercial crude oil inventories dropped by 1 million barrels in the week ended May 20, compared to the previous one. They stood at 419.8 million barrels, which is below the five-year average for this time of year, revealing tight conditions ahead of the driving season.
CEO of oil giant Saudi Aramco, warned of "very low spare capacity", speaking on Bloomberg on the sidelines of World Economic Forum in Davos. Mr Amir Nasser noted that spare capacity is "2% or lower in a market of 100 million barrels". [1]
Also on Wednesday, the US Fed released its accounts form the policy meeting earlier in the month, on which it had delivered its biggest rate hike in 22 years. The minutes were relatively hawkish, but did not add anything new.
These developments are supportive of USOIL which has been struggling for direction this week, as markets continue to grapple with the prospects of stagflation, fearing that the Fed's tightening along with other factors could plunge the economy into a recession.
Investors will get fresh updates on this front, as US GDP is due shortly and PCE inflation is expected tomorrow. Both releases are significant and could determine the next move of USOIL.
The commodity is in a consolidation mode this week, with the Bollinger Bands squeezed, awaiting form the catalyst that will break this pattern. From a purely technical prospective, a break higher seems more reasonable, since black golds sits above the EMA200 (black line) and the daily Ichimoku cloud, while the Relative Strength Index hovers above the 50 line.
As such, bulls have the advantage and keep 115.17 in their crosshairs, but we are not sure they are ready to surpass it and challenge 122.04.
However, the lack of progress makes USOIL vulnerable to the EMA200 (106.90-70) and a break below it would put pressure on the downside and the ascending trendline from the December lows into question (at around 102.00).
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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