Crude Oil finds floor after surprise drawdown in US stockpiles

• Oil prices are trading back around $70.00 after a surprise drawdown in US API data. 
• Kazakhstan is set to raise Oil output next year, according to Bloomberg. 
• The US Dollar Index trades around 107.00 ahead of the last Fed meeting of 2024.

Crude Oil trades slightly up on Wednesday at around the $70 round level amid recent headlines that provide both headwinds and tailwinds. Some support for Crude Oil prices came after a chunky drawdown in the crude stockpile change numbers from the American Petroleum Institute (API) on Tuesday. With a draw of 4.7 million barrels, larger than the 1.85 million barrels decline expected, Crude Oil prices received a small leg up.

However, Some bearish news for Oil comes from Kazakhstan. Prime Minister Olzhas Bektenov said on Tuesday that he had ordered the Energy Ministry to intensify efforts to increase Natural Gas and Oil output. The Energy Ministry must ensure that 2025 Oil production is at the planned level, Bektenov said, Bloomberg reports.

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is rather flat ahead of the last Federal Reserve (Fed) meeting of 2024. A 25 basis point rate cut, lowering the benchmark rate from 4.75% to 4.50%, is baked in. The focus will rather be on the dot plot projections, which will show whether Fed officials are pricing in a Trump effect with rates steady or higher in the coming years. 

At the time of writing, Crude Oil (WTI) trades at $70.14  and Brent Crude at $73.42.

Oil news and market movers: Kazakhstan defies OPEC

• The Oil production plans in Kazakhstan’s budget indicate an increase of 9.4 million metric tons next year, or about 190,000 barrels a day.  That is more than double the current 41,000 barrels Kazakhstan is producing under the current OPEC+ production limitation agreement, Bloomberg reports.
• The Energy Information Administration (EIA) is set to release around 15:30 GMT the weekly Crude stockpile change numbers. Expectations are for a drawdown of 1.7 million barrels against last week’s decline of 1.425 million barrels.
• Pricing of key Middle Eastern grades is rising, according to traders dealing with the typically higher-sulfur, or sour, Oil from the region. Cargoes of Qatar’s Al-Shaheen for February loading were about $1 a barrel more expensive than the regional benchmark, compared with a premium of as much as 70 cents for January, Bloomberg reports.  

Oil Technical Analysis: Not breaking any pots

Crude Oil prices look to be unable to move away from the $70.00 in either direction as, for nearly six trading days in a row, Crude Oil prices have been propelled back to that level. With liquidity starting to thin, it looks increasingly likely that this will be the steady level for the last few trading days of 2024.  

Looking up, $71.46 and the 100-day Simple Moving Average (SMA) at $71.03 are acting as firm resistance levels. On Friday, already some selling pressure emerged ahead of that same 100-day SMA. In case Oil traders can plough through that level, $75.27 is up next as a pivotal level, though watch out for quick profit taking with the year-end quickly nearing. 

On the downside, it is too early to see if the 55-day SMA will be reclaimed again at $70.12. That means that $67.12 – a level that held the price in May and June 2023 – is still the first solid support nearby.  In case that breaks, the 2024 year-to-date low emerges at $64.75 followed by $64.38, the low from 2023.

US WTI Crude Oil: Daily Chart