Wednesday Jul 29 2020 09:34
2 min
Crude and Brent oil continue to trade sideways today, with crude adding $0.38 and Brent up $0.40 to reclaim around half of yesterday’s losses.
While crude oil has managed to rise above previous long-term resistance at $41, a new ceiling at $42 has quickly been established, and WTI continues to trade within a narrow range. It is the same story for Brent – a break above $44 early last week couldn’t be sustained.
Today’s gains have been prompted by the latest American Petroleum Institute’s crude oil inventories data, which has surprised with a sizeable 6.829 million barrel draw. Analysts had expected to see a mild increase of 357,000 barrels.
While this points to better-than-expected demand, it’s worth noting that last week’s figures revealed a shock build of 7.544 million barrels against expectations of a draw.
Also capping gains are delays to the next US stimulus bill. Republicans and Democrats are still debating the measures – Democrats claim they don’t go far enough, but President Trump also has criticisms of the bill.
Oil gains could accelerate on this afternoon’s US crude oil inventories data from the Energy Information Administration. Analysts predict a build, but after the API’s figures we could see the data confirm a large, unexpected draw instead.
Market focus on tonight’s announcement from the Federal Open Market Committee could keep a lid on price action. Traders are expecting the FOMC to reaffirm its commitment to stimulus – the Federal Reserve has already announced that its lending programmes will continue until the end of the year, beyond the original September end date.
However, if policymakers don’t sound as dovish as markets expect this could fuel a rebound for the dollar, which this week hit two-year lows. Dollar strength would put downside pressure on crude and Brent even if the latest inventories data is positive.
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