Oil is pulling back strongly today, with declines intensifying around 4:00 PM after the DOE report, which showed a significant increase in oil inventories. The report also indicated a decrease in inventories of petroleum products, but this did not necessarily indicate higher demand, as there was a decline in refinery utilization rates. Data regarding implied fuel demand rose compared to last week but remain below averages. It's also worth mentioning that downward pressure appeared yesterday after rumors surfaced about the possible further sale of oil from strategic reserves to lower fuel prices. Such pressure may increase as the US election approaches.
Interestingly, a large part of recent increases is due to geopolitical tensions. On the other hand, oil is in a strong backwardation, indicating market certainty about lower prices in the future and at the same time certainty about geopolitical stability. It's worth noting that significant uncertainty in the gas market in 2022 meant we didn't see such a strong backwardation in the market.
Therefore, if geopolitical risk subsides and OPEC+ decides to restore some production, we may experience a decline in prices to the range of 75-80 USD per barrel in the second half of this year.
From a technical standpoint, it's worth noting that the scenario of a large head and shoulders pattern is still in play, and additionally, the support associated with the 100-period moving average is currently being tested. Breaking this line in 2019 or 2023 subsequently led to fairly deep declines.
Source: xStation5
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