Crude oil faces challenges as stockpiles rise; Fed stance and US CPI data crucial. WTI’s outlook is uncertain.
On October 12, 2023, crude oil prices experienced a decline as market participants eagerly awaited inventory data. Crude oil faced challenges despite favorable conditions for equities due to hawkish comments from Federal Reserve speakers.
Data released by the American Petroleum Institute (API) showed a significant increase in stockpiles, rising by 12.94 million barrels for the week ending October 6, far exceeding the anticipated 1.3 million expansion following a previous decrease of 4.21 million barrels. Attention now shifts to the official Energy Information Agency (EIA) stockpile figures expected later in the day. WTI futures hovered around US$83 per barrel, while the Brent contract slightly exceeded US$85.50 per barrel.
Crude Lower on Stockpiles, Fed Focus; WTI Drops?
The focus also turned to the upcoming release of the US Consumer Price Index (CPI) after the US Producer Price Index (PPI) exceeded expectations, reaching 2.2% year-on-year until the end of September compared to the anticipated 1.6%. Economists surveyed by Bloomberg estimated the year-on-year headline CPI to be 3.7% until the end of September.
Federal Reserve officials, including Governor Christopher Waller and Boston Federal Reserve President Susan Collins, continued emphasizing a less hawkish stance, as indicated in the Federal Open Market Committee (FOMC) meeting minutes released overnight. The minutes highlighted that the view of monetary policy was in restrictive territory, leading to a more balanced assessment of risks.
Equity markets responded positively to the news, with the Dow Jones, S&P 500, and Nasdaq all posting gains. Asian-Pacific equities also performed well, buoyed by news of the national wealth fund purchasing stocks in central Chinese banks. Futures indicated a stable start for the European and North American trading sessions.
Currency markets remained relatively calm, with the US Dollar slipping against major pairs but gaining against commodity-linked currencies. Gold maintained its strength, trading near US$1,880 per ounce.
In the technical analysis of WTI crude oil, the futures contract filled the gap from earlier in the week, potentially signaling bearish implications. The study identified support levels at 83.53, 83.34, and the previous low at 81.50 and noted resistance levels at 84.89, 87.76, 88.15, and 88.19. It’s essential to note that past performance does not guarantee future results.