Crude Oil rallies after sharp drawdown in EIA supplies, WTI reclaims $83

• Crude Oil markets rebound after EIA reports a significant drawdown in US stocks.
• WTI still remains below the early week’s peaks.
• Geopolitical concerns continue to add a risk premium to energies.

West Texas Intermediate (WTI) US Crude Oil bounced into the high end on Wednesday, climbing back towards $83.50 per barrel after an early dip back to $82.00. The Energy Information Administration (EIA) posted a much larger week-on-week drawdown in US Crude Oil reserves, sparking a risk rally despite an initial plunge following worse-than-expected economic figures from the US.

According to the EIA, US Crude Oil Stocks Change for the week ended June 28 contracted sharply by -12.157 million barrels, well below the forecast drawdown of -150K and entirely engulfing the previous week’s 3.591 million barrel buildup. The EIA also noted similar, albeit smaller, drawdowns in gasoline and distillate inventories over the same period.

Crude Oil markets initially balked on Wednesday before an EIA-fueled rally, with WTI backsliding to $81.00 per barrel after the US reported a broad miss in key economic figures. ADP Employment Change eased to 150K from the previous 157K, Initial Jobless Claims ticked up to 238K for the week ended June 28 from 233K, and June’s USM Services Purchasing Managers Index (PMI) tumbled to a multi-year low of 48.8 compared to the previous month’s 53.8.

The ongoing Israel-Palestinian Hamas conflict continues to broil in the Middle East, keeping a firm risk bid underpinning Crude Oil prices as energy traders hold onto fears that a destabilization of the situation would see the conflict spill over into neighboring countries, specifically drawing Iran directly into matters.

WTI technical outlook

Despite a bullish push on Wednesday, WTI trades south of the early week’s peak bids near $83.75 and found a fresh technical floor at the $82.00 handle. However, intraday price action is still holding just north of the 200-hour Exponential Moving Average (EMA) at $81.55.

After a bullish breakout from a rough near-term consolidation phase, WTI is leaning steeper into a bull run, but momentum remains thin and could see Crude Oil backslide into the 200-day EMA rising above the $74.00 handle.

WTI hourly chart

WTI daily chart