Crude Oil Rises With Hints of Tightening Market Fundamentals

Some factors are driving black gold prices up, pushed by signs of increased demand from the United States and supply disruption risk from Iraqi Kurdistan (representing a shortfall of 450,000 barrels of crude oil per day), but also by the possible decline in Russian supply.

United States Crude Oil Inventories

On the supply side, the sharp fall in commercial crude oil reserves in the United States for the week ended March 24 (-7.489 million barrels of crude) pushed both Brent and WTI benchmarks higher, while the market was barely expecting a small rise in stocks:

Chart, bar chartDescription automatically generated

The Energy Information Administration (EIA) also noted new signs of firming US demand, which now stands 3% above its level of last year at the same time.

On Tuesday, Russian Energy Minister Nikolai Shulginov announced that Russia had succeeded in redirecting all its crude oil exports affected by Western sanctions to "friendly" countries.

In retaliation for those sanctions targeting Urals crude oil, the Kremlin announced last week that it would extend the reduction of its crude production by half a million barrels per day until the end of June, representing a cut that should weigh on the global oil supply.

United States Gasoline Inventories

U.S. gasoline inventories were pretty much in line with crude oil stocks, likely to support prices as well:

ChartDescription automatically generated

Charting & Analysis

Graphical user interface, chartDescription automatically generatedWTI Crude Oil (CLJ2023) Futures (April futures contract, daily chart)

Graphical user interface, chart, histogramDescription automatically generated
WTI Crude Oil (CLK2023) Futures (May contract, 4H chart)

On the West Texas Intermediate (WTI) crude oil May 2023 futures contract, the bulls have been helping the market recover from the red previous week (along with concerns over the banking sector). Where do you think that the market will head to? Will it revisit its next quarterly pivot around $79.70 by confirming a bullish bias? Or rather find support around $71.90 (S1) as a rebounding floor?

Sebastien Bischeri,
Oil & Gas Trading Strategist