Light crude oil futures are recovering after reaching a low of $68.36, boosted by the revocation of Chevron’s Venezuela license. Market sentiment is mixed with technical resistance near $70.35 amid concerns over supply and inventory fluctuations. Traders should watch for potential SPR purchases and developments in Venezuelan exports, which may affect market dynamics significantly.
Light crude oil futures experienced slight recovery on Thursday, rebounding from a low of $68.36 reached in the last session, their lowest since December 27. Technical indicators reflect a mixed perspective, with support identified at $67.06 and resistance at the Fibonacci marker of $70.35. The 200-day moving average at $70.60 further establishes a significant barrier for bullish movement.
As of 11:35 GMT, Light crude oil futures were valued at $69.40, reflecting an increase of $0.78 or 1.14%. Oil prices have gained momentum following U.S. President Donald Trump’s decision to revoke Chevron’s license to operate in Venezuela, a reversal of a license granted by former President Biden over two years prior. Chevron, responsible for exporting approximately 240,000 barrels per day of Venezuelan crude, which constitutes over 25% of the nation’s total output, is now prohibited from continuing these exports.
This policy adjustment has sparked renewed supply concerns within an already volatile market, leading to the unwinding of short positions established during the recent downturn. The license cancellation coincides with traders evaluating the potential for increased demand due to discussions of possible purchases for the U.S. Strategic Petroleum Reserve (SPR). The possibility of government acquisitions to replenish the SPR has provided additional support to market prices.
Trump’s administration indicated a commitment to expedite the replenishment of the SPR, contrasting sharply with former President Biden’s criticisms regarding the reserve’s prior use to lower gasoline prices. This government purchasing could establish a temporary support level for oil prices if initiated near the current price levels.
Recent data from the Energy Information Administration (EIA) revealed an unexpected reduction in U.S. crude inventories, decreasing by 2.3 million barrels to 430.2 million barrels, defying predictions of a 2.6 million-barrel increase. In contrast, stockpiles at the Cushing, Oklahoma hub rose by 1.3 million barrels to 24.6 million barrels, reaching the highest levels since November.
Gasoline inventories also saw an increase, rising by 400,000 barrels to 248.3 million barrels, while distillate stockpiles surged by 3.9 million barrels, significantly exceeding the anticipated 1.5 million-barrel draw. Refinery utilization climbed to 86.5%, indicating active refining operations despite the mixed inventory data for refined products.
While light crude oil futures have shown modest recovery, market sentiment remains cautious. With resistance levels near $70.35 and $70.60, upward price movements may encounter formidable challenges unless notable bullish catalysts arise. The unexpected builds in gasoline and distillate inventories, combined with geopolitical uncertainties surrounding Trump’s engagements in Russian-Ukrainian peace negotiations, contribute to a prevailing bearish sentiment.
In the upcoming days, traders should monitor developments regarding potential SPR purchases and fluctuations in Venezuelan crude supply. A breach of the $67.06 support level could result in further sell-offs, whereas a rise above the $70.60 mark could signal a more significant recovery. Currently, the market leans towards a bearish outlook, but the potential for strategic reserve buying and geopolitical shifts could swiftly alter market dynamics.
In summary, the recent revocation of Chevron’s license to operate in Venezuela by President Trump has affected light crude oil prices, contributing to market volatility. While futures are rebounding modestly, mixed inventory reports and geopolitical uncertainties maintain a cautious market sentiment. Traders must remain vigilant as developments in government interventions and crude supply fluctuations could significantly impact pricing in the near future.
Original Source: www.fxempire.com
