Light crude oil futures are recovering after a low of $68.36, boosted by President Trump’s revocation of Chevron’s Venezuela license. This increases supply concerns in a sensitive market while EIA data shows unexpected drops in crude stockpiles. The potential for U.S. government purchasing crude to refill the SPR adds market support, although mixed inventory data maintains a cautious sentiment amongst traders.
Light crude oil futures are experiencing modest gains, recovering slightly after hitting a low of $68.36—their weakest point since late December. The market shows mixed technical indicators, with immediate support at $67.06 and resistance at the Fibonacci level of $70.35. Additionally, the 200-day moving average at $70.60 presents a crucial barrier for any bullish movement ahead.
As of 11:35 GMT, light crude oil futures are trading at $69.40, reflecting an increase of $0.78 or +1.14%. The uptick in prices follows U.S. President Trump’s revocation of Chevron’s license to operate in Venezuela, reversing a license granted by former President Biden over two years ago. Chevron’s operations contributed approximately 240,000 barrels per day (bpd) of Venezuelan crude, accounting for over 25% of the country’s oil production, which will now cease.
This policy alteration has elevated supply concerns in an already volatile market, leading to the unwinding of short positions that had been established during recent sell-offs. Concurrently, traders are considering the potential for increased demand with reports suggesting the U.S. government may seek to purchase crude to replenish the Strategic Petroleum Reserve (SPR), thereby providing further support to oil prices.
President Trump last week expressed a desire to swiftly refill the SPR, in contrast to criticisms of Biden’s previous usage of the reserve to reduce gasoline prices. Should the government proceed to buy crude near current levels, it could create a temporary price floor. Recent EIA data also revealed an unexpected decline in U.S. crude stockpiles, dropping by 2.3 million barrels to 430.2 million, against anticipated builds of 2.6 million barrels.
However, there was a rise in stocks at the Cushing, Oklahoma hub, which increased by 1.3 million barrels to 24.6 million, the highest figure since November. Gasoline inventories rose by 400,000 barrels to 248.3 million, and distillate stockpiles surged by 3.9 million barrels, significantly more than anticipated draws of 1.5 million barrels. Despite this mixed inventory data, refinery utilization reached 86.5%, indicating resilient refining activity.
The current market sentiment remains cautious, with resistance levels near $70.35 and $70.60. Any upward price movement will likely encounter difficulties unless strong bullish drivers emerge. The unexpected builds in gasoline and distillate stocks, alongside geopolitical uncertainties from Trump’s discussions on Russian-Ukrainian peace, contribute to a bearish market sentiment.
Traders should monitor possible SPR purchases and developments regarding Venezuelan crude supplies closely. If prices fall below the $67.06 support level, it could trigger a more significant sell-off. Conversely, a breakout above $70.60 may lead to a more robust recovery. Presently, the market inclines bearish, but the prospect of strategic reserve acquisitions and geopolitical changes could alter this sentiment rapidly.
In summary, light crude oil futures are showing slight recovery amid shifting geopolitical dynamics and operational changes regarding Venezuelan oil exports. The market is impacted by Trump’s decision to revoke Chevron’s operating license, heightening supply concerns. Mixed inventory data and the possibility of government crude purchases to replenish the SPR complicate the outlook, indicating potential volatility ahead. Traders must stay alert to key support and resistance levels, as market sentiment remains cautious.
Original Source: www.fxempire.com
