- West Texas Intermediate (WTI) crude oil rallies following a second consecutive week of declining US crude oil inventories, indicating a tightening supply situation.
- Resumption of US–China trade negotiations this weekend bolsters the demand outlook amidst improving global risk sentiment.
- WTI crude oil price approaches the critical psychological resistance level of $60.00 per barrel, with the 20-day Simple Moving Average (SMA) and the 23.6% Fibonacci retracement level identified as key obstacles to further upward momentum.
West Texas Intermediate (WTI) crude oil is exhibiting a strong upward trend on Thursday, as oil prices are buoyed by a combination of factors: declining crude oil inventories in the United States (US) and increasing optimism surrounding the imminent resumption of US–China trade discussions. These developments have fostered expectations of a potential easing of trade tensions between the world’s two largest economies, which could stimulate global economic growth and, consequently, oil demand.
As of this writing, WTI crude oil is trading higher by 2.83% at $59.33 per barrel, extending its recovery from earlier session lows and recouping losses incurred during the month of April. The price movement reflects a renewed bullish sentiment in the oil market.
US inventories post second weekly decline, tightening outlook
The current week’s upward price momentum has been largely driven by successive inventory drawdowns, providing further evidence of a tightening supply situation within the US oil market. These drawdowns suggest either increased demand, reduced production, or a combination of both, all of which tend to support higher prices.
On Tuesday, the American Petroleum Institute (API), a leading industry organization that provides preliminary supply estimates, reported a substantial decrease of 4.49 million barrels in US crude oil stockpiles for the week ending May 3. This figure significantly exceeded market expectations, which had anticipated a draw of approximately 2.5 million barrels. This followed a surprising build of 3.76 million barrels the previous week, highlighting the volatility in inventory levels.
Official data released on Wednesday by the US Energy Information Administration (EIA) confirmed a decline of 2.03 million barrels. While this figure was slightly below consensus forecasts, it marked the second consecutive weekly decrease, following a 2.696 million barrel draw the week prior. Despite the slightly lower-than-anticipated government figure, the consecutive declines in crude oil inventories serve to reinforce the narrative of a tightening supply situation or improving demand fundamentals within the US oil market, both of which are conducive to higher oil prices. Market analysts are closely watching these inventory reports as key indicators of the overall health and balance of the oil market. Furthermore, geopolitical tensions in the Middle East and potential disruptions to supply chains are also contributing to the upward pressure on oil prices.
