The U.S. Secretary of Energy said that the strategic oil reserve needs to be replenished for several years, and WTI oil prices may fall further

2023-03-24 18:04:18

On Friday, March 24, during the Asia-Europe session, U.S. crude oil fluctuated slightly, and is currently trading around $69/barrel. U.S. Energy Secretary Granholm said it could take years to replenish the U.S. Strategic Petroleum Reserve (SPR), raising concerns about a potential supply glut. Russia's continued supply of crude oil to the global market also added to the pressure on the oil market.

U.S. Energy Secretary Jennifer Granholm told lawmakers it would be difficult to take advantage of this year's low prices to build up SPR inventories, which could take years to refill. Oil prices fell again amid ongoing banking crisis and fears of a possible recession.

In order to combat high inflation, President Biden historically sold 180 million barrels of strategic reserves last year, and the US SPR inventory fell to the lowest level since 1983. But the White House said in October it would buy back oil for the SPR when prices were at or below the $67-$72 a barrel range.

Giovanni Staunovo, an analyst at UBS, said Granholm's comments heightened concerns about a potential oversupply, especially given the Energy Department's plan to continue releasing 26 million barrels of crude, a measure mandated by Congress. part.

"The market now thinks that the U.S. will not replenish its oil reserves even if NYMEX crude futures trade at $67-72 a barrel, leading to a fresh wave of selling," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Vandana Hari, founder of Vanda Insights, an oil market consultancy, said that as long as the banking industry continues to be turbulent, fear and cautious expectations will still exist, and market volatility is expected to continue.

Affected by the successive closures of American banks and the deep crisis of Credit Suisse Bank, banking stocks in the European and American markets have fluctuated sharply recently. International observers believe that the market's crisis of confidence in the banking industry in Europe and the United States continues to ferment and is spreading to wider areas such as industry valuation and overall liquidity, and systemic risks may be difficult to eliminate in the short term.

The U.S. dollar is relatively weak. As the world's largest oil importer, China's demand for commodities is surging. Goldman Sachs is bullish on the outlook for oil prices, which boosts the morale of the bulls. However, investors still need to be wary of the possibility of further declines in oil prices.

In this trading day, we need to pay attention to the changes in the US crude oil drilling data, the US manufacturing and service industry PMI data released by S&P Global in March, and the monthly rate of durable goods orders in the US in February. The Canadian economic calendar will include January retail sales. Pay attention to the geopolitical situation, speeches by Fed officials and news related to the banking industry in Europe and the United States. Fed official James Bullard is due to speak, and his views on inflation and the future trajectory of interest rates may also influence prices.

CME's latest crude oil trading data

The latest data from the CME Group crude oil futures market showed that traders increased their open interest for the third straight day on Thursday, this time by about 6,300 contracts. In contrast, volume remained unchanged, down by about 2,700 contracts.

WTI crude oil prices approached the $72 mark on Thursday and closed slightly below $70. The rise in open interest came as prices fell, supporting the view that the commodity could continue to fall in the near term. The next support to watch for is near the 2023 low of $64 (March 20).


WTI Oil Price Technical Analysis

MACD dead cross, WTI oil price rebound was blocked for two consecutive trading days, and left a long upper shadow line, implying strong upper resistance.

The initial support is around the 5-day moving average of $69.29, and Tuesday's low is around $66.89.

If the support is lost, it will increase the bearish signal in the market outlook.

Further support refers to the March 15 low of $65.67 and the recent low of $64.10.

Since the KDJ golden cross signal is still there, the K-line pattern still has the possibility of a V-shaped reversal.

Before falling below the 5-day moving average, oil prices still have the possibility of continuing to rebound in shocks. The initial resistance is around $71.65, the high point on Thursday, and the low point resistance on February 26 is around $72.24.

If this resistance can be broken, it will add a bullish signal for the market outlook.

The February 23 low resistance was around $73.80, and the March 10 resistance was around $74.75.


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