The dollar fell following lower-than-expected US inflation data, to the advantage of black gold. What else is driving crude oil prices these days?
Slowing U.S. Inflation vs. the Greenback
WTI crude oil futures rallied back above the $90 mark this week on the NYMEX as the US dollar weakened. On Wednesday, the safe-heaven currency indeed lost some strength after a lower-than-expected US July inflation figure convinced investors to move towards riskier assets, hence the bound of U.S. equity indexes. The outcome of the Consumer Price Index (CPI) report could potentially lead the Federal Reserve to get a little less aggressive with its interest hike cycle since the CPI in July in the United States slowed its course to 8.5% year on year from 9.1% in June.
Q2 2022 hedge fund letters, conferences and more
When all the data turns into bearish territory for both legs – the greenback and black gold – it is usually the optimism (or pessimism, depending on which point of view we take aside) triggered by the macroeconomic perspective that leads the markets. In that case, as the news was bearish for the US dollar as well, it is probably the one which will set the tempo for the rest of the day. Therefore, despite bearish inventory data for crude oil, the drop in the US dollar gets stronger to push other assets towards the upside.
Fundamental Analysis
On Wednesday, the Energy Information Administration (EIA) released the weekly change in Crude Oil Inventories.
U.S. Crude Oil Inventories
Even if we saw the commercial crude oil reserves in the United States sharply rising to 5.458M barrels while the expectations were barely showing a rise (0.073M barrels), the impact was rather mitigated and left in the background as the more optimistic equity indexes were soaring.
US crude inventories have thus decreased by not even half a million barrels in volume, which is not a very significant deviation to mention a greater demand and is not really a strong bullish factor for crude oil prices, since the drop can be explained, in part, by the increase in oil exports.
(Source: Investing.com)
U.S. Gasoline Inventories
In addition, the U.S. gasoline demand figures probably helped to support rising oil prices:
This is precisely where we could eventually see a rise in demand marked by an unexpectedly sudden drop in gasoline reserves, since the latter were reduced by almost 5 million barrels.
Geopolitics
On the geopolitical scene, investors are monitoring the ongoing US-China tensions over Taiwan. On a more positive note, we are facing a potential return of Iranian crude to the market with the ongoing negotiations of the nuclear agreement with the different trade partners.
WTI Crude Oil (CLU22) Futures (September contract, daily chart)
RBOB Gasoline (RBU22) Futures (September contract, daily chart)
Brent Crude Oil (BRNU22) Futures (September contract, daily chart) –Contract for Difference (CFD) UKOIL
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Sebastien Bischeri
Oil & Gas Trading Strategist
The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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