WTI, Brent Shrug Off US Inventories Surge as Oil Prices Hit Fresh 2023 Highs

OIL PRICE FORECAST:

Most Read: What is OPEC and What is Their Role in Global Markets?

Oil prices continued their advance this morning helped by a weaker USD. The surge in US inventories seems to be overshadowed by growing concerns around tighter supply for the remainder of 2023.

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IEA REPORT, OPEC+ AND US INVENTORIES SURGE

Yesterday brought the IEA monthly report which cautioned that the ongoing supply cuts by Saudi Arabia and Russia will result in a deficit during Q4 of 2023. The OPEC monthly report released a day earlier pointed to solid demand but had a similar outlook on a supply deficit should the current production cuts remain in place to the end of the year. This coupled with a shutdown of oil terminals in Libya amid a storm has contributed to a perception of tighter supply in both the short and medium term. This seems to be weighing on market participants with a surge in US inventories yesterday unable to arrest concerns.

The inventory data from the US EIA surprised, increasing by almost 4 million barrels for the week ending September 8. This increase arrested a four-week slump with the previous week indicating a drawdown of around 6.3 million barrels. Meanwhile, US API data also showed an increase of around 1.17 million barrels, with the inventory buildup largely being attributed to the end of summer period in the US.

The concern around the high Oil price at the moment was quite evident in yesterday’s US CPI release, with a rise in energy and gasoline prices the largest contributors to the rise in the headline figure. Energy prices increased 5.6% with gasoline prices rising 10.6% pushing headline inflation to 3.7%.

US DATA AHEAD

The biggest factor that could provide some respite for the current rally in oil prices could come from a stronger US dollar. There is still a fair bit of US data ahead this week which could have an impact and cap the current rally in Oil prices.

Later today we get US PPI data which will provide a snapshot to potential price pressures moving forward and US Retail sales data which has remained resilient of late. A beat of the forecasted figures for both data releases could provide some impetus to the US Dollar and provide a temporary pause in the oil price rally.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

From a technical perspective both WTI and Brent have printed fresh 2023 highs this morning. WTI approaching the key $90 a barrel mark, the first time since November 2022. Interesting enough the 14-day RSI has been in overbought territory since the beginning of September without any meaningful pullback as of yet.

The US Dollar rally has also taken a pause which is helping Oil prices maintain their bullish momentum. Should WTI find some resistance and selling pressure around the $90 a barrel mark, we could finally get a retest of the ascending trendline which could provide potential longs with an opportunity to get involved.

For now, given the strong uptrend in play it would be unwise to attempt to pick a top in Oil prices as the underlying supply concerns continue to support prices.

WTI Crude Oil Daily Chart – September 14, 2023

Source: TradingView

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Brent Crude continues to look like a mirror image of WTI with the 14-day RSI resting at the same levels as well.

Key Levels to Keep an Eye On:

Support levels:

Resistance levels:

Brent Oil Daily Chart – September 14, 2023

Source: TradingView

Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda