The Commodities Feed: Oil falls as Middle East supply fears ease
At a Glance
The desk maintains a bearish outlook on oil prices following recent developments. Per the full note from ing-think, easing fears surrounding Middle Eastern supply disruptions and a surprise increase in U.S. crude inventories have pressured prices lower. The EIA reported a build of 922k barrels in U.S. commercial crude stores, contrasting sharply with expectations for a draw. Moreover, with WTI remaining below $90 per barrel, this suggests a paradigm shift in market sentiment as supply concerns diminish.
Key Takeaways
- 01Oil prices are under downward pressure due to regained Middle East supply and rising U.S. inventories.
- 02A surprising build of 922k barrels in U.S. crude inventories contrasts sharply with market expectations.
- 03WTI crude remains below $90 per barrel, indicating a shift in market sentiment.
- 04Bearish sentiments are reinforced by the combination of easing supply concerns and lower refinery utilization.
Full Analysis
What the desk is arguing
The desk argues that oil prices are poised for further declines due to recovering Middle East supply and rising U.S. crude inventories. Per the full note from ing-think, concerns over tighter global supplies have eased significantly with reports of Saudi Arabia resuming tanker loadings at the Yanbu terminal and a significant build in U.S. crude stocks.
Supporting this view, the latest EIA data showed a surprising 922k barrel increase in U.S. crude inventories, defying market expectations of a 455k barrel draw. With the NYMEX WTI remaining below $90 per barrel, bearish sentiment appears to be gaining traction as the market recalibrates away from previous concerns.
Where it sits in our coverage
Our consensus target for crude oil is $1.075, within a range of $1.04 to $1.12. Several firms have contributed to this outlook: - jpmorgan: $1.10 (Mar26) - bofa: $1.04 (Mar26)
Given that we have a consensus sitting at the upper end of this range, our bearish view on oil aligns with the sentiment expressed in various reports while exhibiting divergence from bofa’s more cautious perspective.
How other firms see it
Firms aligned with a bearish outlook on oil prices include jpmorgan, aligning with our view, while bofa presents a contrary stance with a lower target of $1.04. This divergence emphasizes the uncertainty in market sentiment.
Key interconnected markets include USD/CAD, which may react to oil price fluctuations, and ongoing analysis of U.S. monetary policy, as it can influence the broader macroeconomic landscape impacting commodity prices.
Market Implications
Traders should monitor WTI's performance as it hovers around $90 per barrel, a psychological resistance level. Should inventories continue to rise, particularly with another report due next week, further declines in oil prices may ensue, potentially impacting related pairs like USD/CAD.
From the original
Articles The Commodities Feed: Oil falls as Middle East supply fears ease Published 08:27 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices declined after recovering Middle East export flows and a surprise build in US crude