Oil steady while EIA sees exceeding demand outstripping in 2024

• WTI Oil steadies near $72 after a positive close on Tuesday. 
• Overnight API was a chunky drawdown of over 5 million barrels. 
• The DXY US Dollar Index holds above 102.00, while traders keep powder dry ahead of Thursday’s US inflation reading. 

Oil prices are going nowhere despite quite a few bullish elements to take into account this Wednesday. The overnight publication from the American Petroleum Institute (API) revealed a massive draw down of 5.2 million barrels from last week. Meanwhile the US Energy Information Administration (EIA) has released a forecast that demand is to exceed the current Oil supply in 2024 by roughly 120,000 barrels per day on average – and would grow substantially even more should OPEC+ issue more production cuts. 

Meanwhile, the DXY US Dollar Index, a key factor driving Oil valuations, is holding ground at 102.00 despite some selling pressure overnight. Traders are keeping the Greenback steady ahead of the main event for this week, the US Consumer Price Index (CPI) on Thursday. The print could be a gamechanger for 2024. Lower CPI would mean quicker interest rate cuts from the US Federal Reserve and a weaker US Dollar (bullish for Oil prices). 

At the same time, given Oil is a key component in inflation, and since Oil prices came down substantially in the second half of last year, this could further help abate inflation pressures in the US. 

Crude Oil (WTI) trades at $71.90 per barrel, and Brent Oil trades at $77.97 per barrel at the time of writing. 

Oil News and Market Movers: Demand to pickup

• The US Energy Information Administration (EIA) released its forecast for 2024. A shortage of 120,000 barrels per day is to be expected, as long as OPEC+ does not add more production cuts.
• The overnight print of the American Petroleum Institute had a firm draw down of 5.2 million barrels against last week. The number was a bit of a surprise, certainly when compared to distillates and gasoline which saw substantial builds of 4.9 million barrels for gasoline and 6.9 million for distillates. 
• Standard Chartered said in a report on Tuesday that Oil prices are trading $10 beneath their actual fair value.
• Around 15:30 GMT the weekly print of the Energy Information Administration (EIA) will take place. Expectation is for another drawdown of 675,000 barrels against 5.5 million barrels last week. Expectations for this week ranged from a draw of 2.6 million barrels to a build up of 2.1 million barrels. 

Oil Technical Analysis: Oil is not dead at all

Oil prices are not moving on the back of the massive drawdown that was reported overnight by the API. The main reason for this was that the chunky drawdown in crude barrels was paired by large builds in both gasoline and distillates. Should the overnight EIA data reveal a draw down on all fronts, expect a bullish move in Oil prices. 

On the upside, $74 is still holding importance, although the level has become very chopped up. Once back above this, $80 comes into the picture. Still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67 level could still come into play as the next support to trade at, as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply. 

US WTI Crude Oil: Daily Chart