Crude Oil Prices May Break Range on OPEC Update, US CPI Data

CRUDE OIL TALKING POINTS:

Crude oil prices struggle for direction amid conflicting influences
OPEC Monthly Report eyed for updated supply/demand forecasts
US CPI uptick may boost yields and US Dollar, hurting oil prices

Recommended by Ilya Spivak

Get Your Free Oil Forecast

Crude oil prices may finally find a bit of direction having struggled to break free of a narrow range centered around the $60/bbl figure for nearly a month. The benchmark WTI contract has been conspicuously rudderless as investors attempt to parse a conflicted fundamental backdrop.

On one hand, the demand outlook is looking brighter thanks to expansive policy stimulus – both fiscal and monetary – as well as vaccination’s promise of unlocking whole swaths of economic activity derailed by Covid-linked restrictions. On the other, supply may swell with the easing of the OPEC+ output cap scheme, a post-Covid normalization of supply chains, and possible détente between the US and Iran.

Today, an updated OPEC Monthly Report will offer view on the supply/demand balance which may inform investors’ calculus. Projections suggesting the incoming supply swell will be more than absorbed by demand restoration may offer crude a bit of a lift.

The American Petroleum Institute (API) will also release its estimate of weekly US inventory flows. The outcome will be weighed against forecasts calling for a 2.5-million-barrel draw expected to be reported in official EIA statistics Wednesday. A larger outflow may underpin energy prices, whereas a smaller one – or even a surprise build – might translate into modest downside pressure.

US CPI data may overshadow asset-specific considerations however. The core on-year inflation rate is seen rising to 1.5 percent in March, the highest since December. US price growth data has tended to outperform relative to forecasts recently, opening the door for an upside surprise.

Such an outcome may revive speculation about a sooner-than-expected unwinding of the Fed’s expansive stimulus program. That has scope to renew the 2021 bond yield rally, cooling risk appetite at the expense of cyclically-minded oil prices. A parallel rise in the US Dollar may add de-facto downside pressure since crude is priced in USD terms on global financial markets.

Recommended by Ilya Spivak

How to Trade Oil

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are tracking sideways between swing-low support at 57.25 and inflection level resistance at 63.81. The recent break of the uptrend from November 2020 lows suggests overall positioning is bearish-biased. A daily close below support initially exposes the 53.93-54.86 area (former resistance, 38.2% Fibonacci retracement). Alternatively, a break above 63.81 puts the peak near $68/bbl back into focus.