- WTI trades near $64.70 after touching a seven-week high on Wednesday.
- Surprise U.S. crude stock draw and rising Russia-Ukraine tensions fueled gains.
- Profit-taking, weaker seasonal demand, and returning Kurdish exports temper upside.
Crude oil markets remain caught between two opposing forces: bullish supply shocks and bearish concerns about oversupply. The WTI prices soared 2.5% on Wednesday to settle near $65.00, the highest level since 2nd September.
The US EIA data surprised the market participants with a draw of 607k barrels in crude inventories. The figure contrasted sharply with the expected 235k barrel build, along with a decline in gasoline and distillate stocks, which reinforced the tighter near-term picture of US supply.
Meanwhile, the escalating geopolitical risks continue to lend support to the oil prices. Ukraine’s drone attacks on Russian refineries and export terminals resulted in disrupting output, with reports of fuel shortages in Russia. On the other hand, the US President urged NATO to take a hard line against Russia and shoot their aircraft, with a potential fresh wave of sanctions on Moscow. Russia has been a crucial member of OPEC+, and even a marginal threat of chaos could trigger high volatility.
However, the bullish momentum quickly faded in the Asian session as traders booked profits. Supply worries are offset by signs of output resumption in Iraq’s Kurdistan region, where a long-stalled agreement is poised to resume exports. Meanwhile, US production activity has slowed modestly, while winters typically bring weaker demand, resulting in a market surplus. DBS Bank analysts have warned that prices are expected to moderate, with concerns about oversupply taking center stage.
Macroeconomic policy is another key factor to drive oil prices. The Fed Chair Powell and Chicago Fed President Goolsbee struck a cautious tone in their speeches, weighing on the bets of two more hikes this year. Their stance has lent support to the greenback, which is a natural headwind for oil. The policy could further weigh on the oil prices if US data remains upbeat.
Key Events Ahead
The immediate focus remains on the resumption of Kurdish oil exports, which could restore a significant volume of oil to the global markets. Meanwhile, traders are also closely watching the upcoming US economic data, including US GDP, weekly jobless claims, and the US Core PCE Index report.
