Oil finds floor near $76 after unexpected increase in US stockpiles

• WTI Oil finds a floor for now near $76 in a sensitive market.  
• Oil traders were caught by surprise by the EIA build of stockpile by 1.234 million barrels.
• The US Dollar Index firms after the Fed’s rate decision on Wednesday. 

Oil prices appear to have bottomed out on Thursday after a wild ride earlier this week, which was very much headline-driven. Besides the possible sanctions from the US on Venezuelan oil, markets were choked by the possibility of Saudi Arabia looking into ramping up its production. Although the news was about the fact that the plans were scrubbed, the idea alone was enough for markets to halt the rally to $80 and instead retreat by $4. The unexpected hefty increase of the EIA stockpiles reported on Wednesday also weighed on the commodity.

Meanwhile, the US Dollar Index (DXY) is in the green, though momentum appears to be fading again. Although the US Federal Reserve Chairman Jerome Powell pushed back against a March rate cut possibility, he did not really do that for May or June. This means a small tweak in positions, with no substantial moves expected in the US Dollar further. 

Crude Oil (WTI) trades at $76.32 per barrel, and Brent Oil trades at $81.01 per barrel at the time of writing. 

Oil news and market movers: OPEC report on the docket

• Wednesday numbers from the Energy Information Administration threw a spanner in the works for Oil to soon head back to $80. While a drawdown was expected, the number came in at a buildup of 1.234 million against a drawdown of 9.233 million last week. 
• The OPEC will release a statement on its current meeting on Thursday.
• Russian arctic crude shipments have declined significantly after hitting a six-month high in December. 
• A next domino might fall in the Chinese economy as Chinese oil refiners are seeing margins collapse under low demand and rising crude prices since the low of December. 
• Bloomberg released numbers that showed the US produced a staggering 13.3 million barrels per day in November, making it a new monthly record. 

Oil Technical Analysis: US is a fly in the ointment for OPEC

Oil prices, though picking up under the current news headlines, do not hold asmuch upside potential as markets think.  Saudi Arabia’s woes about production levels appear to be a big threat for OPEC at a time when the group sees the US easily matching the current supply cuts by pumping more oil than it has been doing in the past years. 

Although price action came very near, the $80 level will not be easy to beat. Once $80 is broken, $84 is next on the topside. A few dollars further, the red line near $87.66 comes into focus, though by then the Relative Strength Index (RSI) will likely be trading at overbought levels. 

On the downside, the $74 level will act as immediate support for any sudden declines. The $67 level could still come into play as the next support as it aligns with a triple bottom from June. Should that triple bottom break, a new low could be close at $64.35 – the low of May and March 2023 – as the last line of defence.

US WTI Crude Oil: Daily Chart