Crude oil prices this week traded up to their highest level since November 2018. The key driver behind the move was the latest set of industry data which showed a further reduction in stockpiles.
The Weekly Energy Information Administration report covering the week ending March 15th showed US stockpiles falling by 9.6 million barrels from the prior week. This reading was far below the consensus of a 300k build analysts were calling for.
US Crude Exports Near All-Time Highs
The overall level of US crude inventories, excluding the government’s strategic petroleum reserve, is now sitting at 439.5 million barrels. This is its lowest level since January 2019. Looking at the breakdown of the data, the decline in imports could explain the sharp falling inventories. These fell by 660k barrels per day. This could also explain the simultaneous rise in exports, which rose by 800k barrels per day.
US crude exports are now at 3.4 million barrels per day over the last month, just beneath their all-time highs. Indeed, the four-week moving average of US crude exports is now double where it was a year earlier. Meanwhile, the four-week average of US imports has fallen to its lowest level since March 1996.
Get our Weekly Commitment of Traders Report: - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
US Crude Production Back To Record Highs
Interestingly, US crude oil production rose back up to record highs last week, increasing by 100k barrels per day. It now sits back at its 12.1 million barrels per day peak. The data also showed that refinery crude runs increased by 178k barrels per day as utilization rates edged up by 1.3% to 88.9% of total refinery capacity. This level is now the highest its been in just under two months.
Gasoline stockpiles dropped by 4.6 million barrels over the week. This was almost double the expected 2.4 million barrel drop which analysts were looking for. Distillate stockpiles, including diesel and heating oil, also fell by 4.1 million barrels. This was over three times the expected 1.1 million barrel drop.
OPEC Cuts & US Sanctions Supporting Price
Along with this week’s bullish EIA report, the market is also responding to the latest OPEC developments. OPEC production cuts, received 89% compliance in February as the group’s efforts to boost oil prices continue to gain traction. Traders will now wait to receive data at the end of March following Saudi Arabia’s pledge to cut oil production even further.
Alongside official OPEC production cuts, price is also being supported by reduced supply from Iran and Venezuela due to US sanctions on the two countries. The US is currently aiming to reduce Iranian crude oil exports by 20% from May. This is having a strong tightening impact on the market which will be welcomed by OPEC. For now, the fundamental backdrop looks encouraging for higher crude prices.
The weekly chart in oil shows price is currently challenging the 50% retracement from last year’s highs. If price can hold above here, the next levels to watch will be the 61.62 and 63.59, both key structural levels with the latter also holding the 61.8% retracement from last year’s highs. With plenty of strong technical resistance overhead, the move higher is likely to be choppy with plenty of minor retracements along the way.
The H4 oil chart shows price moving in a clear bullish channel, having broken above the recent 58.03 highs. Anti retracement lower within the channel should find support against this level and the rising channel base en route to 61.62 next. Only a break back below the 58.03 level and rising channel base will negate the near term bullish view.