Light crude oil futures are rebounding slightly after hitting a low of $68.36, supported by President Trump’s revocation of Chevron’s Venezuela license. This policy change raises supply concerns while the market anticipates potential U.S. crude purchases to refill the Strategic Petroleum Reserve. Recent EIA data showing a draw in crude stockpiles adds complexity to market sentiment as resistance levels loom ahead.
On Thursday, light crude oil futures experienced modest gains after declining to $68.36 the previous session, marking their lowest level since December 27. Technical indicators reflect a mixed sentiment, presenting immediate support at $67.06 and resistance near the Fibonacci level of $70.35, with the 200-day moving average at $70.60 also posing significant resistance for bullish trends. As of 11:35 GMT, light crude oil futures are trading at $69.40, a rise of $0.78 or 1.14%.
The rise in oil prices follows President Donald Trump’s decision to revoke Chevron’s license to operate in Venezuela, a reversal of the permission granted by former President Biden over two years ago. The cancellation will prevent Chevron, which exports about 240,000 barrels per day—over 25% of Venezuela’s total output—from maintaining its operations, thus raising supply concerns in an already volatile market. This policy shift contributed to the liquidation of short positions amidst recent declines.
Additionally, the market is buoyed by speculation regarding potential U.S. purchases of crude for the Strategic Petroleum Reserve (SPR). Trump recently indicated intentions to replenish the SPR promptly, contrasting with the Biden administration’s previous strategy of tapping the reserve to ease gasoline prices. Government interest in buying crude at current levels may create a temporary support for oil prices.
Recent data from the Energy Information Administration (EIA) revealed a surprising decline in U.S. crude inventories, which fell by 2.3 million barrels to 430.2 million, against predictions of a build. Conversely, stocks at Cushing, Oklahoma rose by 1.3 million barrels, reaching their highest level since November. Gasoline inventories increased by 400,000 barrels, and distillate stockpiles surged by 3.9 million barrels, significantly exceeding the forecasted decline.
While light crude futures have seen some recovery, market sentiment remains careful due to looming resistance levels. The mixed inventory data, particularly regarding gasoline and distillates, alongside ongoing geopolitical tensions related to Trump’s Russian-Ukrainian peace discussions, contribute to a cautious outlook. Traders should closely monitor developments regarding SPR purchases and Venezuelan crude supply for market direction.
If the support level at $67.06 is breached, significant selling pressure may ensue, while a rise above $70.60 could signal a stronger recovery. Although the current outlook is bearish, prospective strategic reserve acquisitions and geopolitical developments may alter market conditions favorably.
In summary, light crude oil futures have shown a slight recovery amid recent developments, particularly the revocation of Chevron’s license in Venezuela. Increased supply concerns, along with the anticipation of U.S. government purchases for the SPR, have influenced market sentiment. The balance of technical indicators creates a cautious atmosphere, warranting close attention to future inventory data and geopolitical events that may influence oil prices significantly.
Original Source: www.fxempire.com
