Oil futures rose sharply this week, driven by a significant decline in U.S. crude oil inventories and signs of a weakening jobs market fueling hopes of a possible rate reduction by the Federal Reserve. Lower interest rates could support oil prices, which have been under pressure due to subdued global demand.
EIA Report Fuels Rising Prices
The U.S. Energy Information Administration (EIA) reported a notable decline in crude oil inventories, which fell by 2.5 million barrels to 457.1 million barrels. barrels for the week ending June 14. This withdrawal exceeded analysts’ expectations for a drop of 2.2 million barrels. Additionally, U.S. gasoline inventories fell by 2.3 million barrels, beating expectations for an increase of 600,000 barrels. Reserves of distillate products, including diesel and heating oil, also fell by 1.7 million barrels against an expected increase of 300,000 barrels. This overall reduction in inventories has contributed significantly to the bullish sentiment in the oil market.
Slowdown in the Job Market and Influence of the Federal Reserve
Recent economic data has shown signs of a slowdown in the labor market in…
Oil futures rose sharply this week, driven by a significant decline in U.S. crude oil inventories and signs of a weakening jobs market fueling hopes of a possible rate reduction by the Federal Reserve. Lower interest rates could support oil prices, which have been under pressure due to subdued global demand.
EIA Report Fuels Rising Prices
The U.S. Energy Information Administration (EIA) reported a notable decline in crude oil inventories, which fell by 2.5 million barrels to 457.1 million barrels. barrels for the week ending June 14. This withdrawal exceeded analysts’ expectations for a drop of 2.2 million barrels. Additionally, U.S. gasoline inventories fell by 2.3 million barrels, beating expectations for an increase of 600,000 barrels. Reserves of distillate products, including diesel and heating oil, also fell by 1.7 million barrels against an expected increase of 300,000 barrels. This overall reduction in inventories has contributed significantly to the bullish sentiment in the oil market.
Slowdown in the Job Market and Influence of the Federal Reserve
Recent economic data has shown signs of a slowdown in the U.S. labor market, fueling speculation that the Federal Reserve could reduce interest rates to stimulate economic activity. The number of Americans filing for unemployment benefits rose more than expected to 229,000 for the week ending June 1, up from 220 000 requests expected. The Federal Reserve has kept its benchmark rate in the range of 5.25% to 5.50%, but recent comments from officials indicate that a rate reduction could be considered. Lower interest rates are expected to boost economic growth and increase demand for oil, providing additional support to prices.
Geopolitical Risks Contribute to Bullish Sentiment
Geopolitical tensions have also played a crucial role in the rise in oil prices. A Ukrainian drone strike on a Russian oil terminal in the port of Azov caused a major fire, highlighting the vulnerability of Russia’s energy infrastructure. This incident highlights the continued risk to global oil supplies linked to geopolitical conflicts. Additionally, growing tensions in the Middle East, particularly between Israel and Hezbollah, have contributed to the increase in the geopolitical risk premium on oil prices. Israeli military actions in Gaza and the possibility of a wider conflict with Hezbollah are fueling fears in the market.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend is upwards. The momentum reversed to the upside this week as buyers broke the minor high at $80.22. The minor trend is downward.
The short-term retracement zone between $76.02 and $73.60 provides strong support, having been successfully tested twice in the last three weeks. It essentially controls the short-term direction of the market, providing hope for bulls and a potential trigger point for a sharp decline for bears.
The new minor range is $86.24 to $72.08. The market is currently trading on the strong side of its pivot at $79.16.
A trade above $86.24 will signal the resumption of the long-term uptrend. The main trend will change downward if it moves to $72.08.
Weekly Technical Forecast
The direction of the weekly light crude oil futures market for the week ending June 28 will likely be determined by trader reaction to $79.16.
Scénario Haussier
A sustained move above $79.16 will signal a strong buyer presence. If this creates enough short-term momentum, we could see further acceleration to the upside with an initial price target at $86.24.
Baissier scenario
A sustained move below $76.16 will indicate the presence of sellers. If it generates enough downward momentum, selling pressure can be expected to extend into the major support zone between $76.02 and $73.60.
Short-Term Forecast: Bullish
Looking ahead, the combination of declining inventories, potential rate cuts by the Federal Reserve, and growing geopolitical risks suggests a bullish outlook for prices oil. JPMorgan analysts noted that an increase in oil demand in the summer, combined with prolonged production cuts by the OPEC+ group, should lead to balances tighter oil tankers and further stock reductions in the coming months.
Given this, traders can expect oil prices to remain supported in the near term, with the possibility of further increases if geopolitical tensions continue to escalate or if the Federal Reserve suggests an upcoming rate reduction.
Technically, strong support at $76.02 to $73.60 should help support a long-term upside. In the short term, however, the key support level is at $79.16. A sustained move above this level will help build upward momentum next week.
The weekly chart indicates that with sufficient buying volume, the market will have a net selling opportunity at $86.34 in the near term.
