Oil Lower Midweek

Oil prices are lower midweek after a sharp fall yesterday as focus turned to easing supply concerns. Crude futures plunged lower on Tuesday as the latest data showed an uptick in outflows from the Middle East despite the ongoing conflict and supply disruptions being caused there. Crude exports from the Middle East were seen rising to 17.5 million barrels per day (rolling 10-day average) which means that outflows from the region have almost fully returned to pre-war levels. Saudi Arabia also noted that volumes moving through its East-West pipeline have recovered to around 50% of capacity and are expected to return to full capacity in the coming weeks. The outage of that pipeline had been a big bullish factor for oil prices recently given the uncertainty over how long it would take to restore the delivery system.

US Govt SPR Release

Alongside the recovery in supply levels, news that the US govt is planning a further release from the SPR of up to 40 million barrels is also helping cool prices. Prior releases from the SPR have been instrumental in helping cap the rally in oil prices and the combination of improved supply levels and a further major release from the SPR should see crude pushing lower near-term. Looking ahead today, traders will be watching the latest report from the EIA which is expected to record a drawdown of almost 1 million barrels, in contrast to the prior week’s 3-million-barrel surplus.

Technical Views

Crude

The sell off in crude has stalled for now ahead of the bull channel lows. With momentum studies bearish, however, focus remains on a continuation lower and a test of the 84.60 level next. Topside, bulls need to break back above 95.06 to restore bullish momentum.