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Crude Oil Trading Alert: After the Federal Reserve’s decision, the oil market explores a way out—challenges under the intersection of demand concerns and supply pressure

2024-03-21

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During the Asian session on Thursday (March 21), U.S. crude oil rebounded slightly as the U.S. dollar index fell sharply after the Federal Reserve maintained expectations of three interest rate cuts this year, providing some support to oil prices. Oil prices fell more than 2% on Wednesday as demand concerns continued to weigh on the market.

May Brent crude oil futures closed down $1.43, or 1.64%, at $85.95 a barrel on Wednesday. U.S. crude oil futures for April delivery on Wednesday ended down $1.79, or 2.14%, at $81.68. The more active May U.S. crude oil contract closed down $1.46 at $81.27 a barrel.

The Brent contract closed at $87.38 a barrel on Tuesday, a new high since October 31; U.S. crude oil closed at $83.47 a barrel on Tuesday, a new high since October 27. There were also some short-term bulls taking profits in the market on Wednesday, which weighed on oil prices.

On Wednesday, the Fed kept interest rates in a range of 5.25% to 5.50%, but policymakers said they still expected to cut rates by 75 basis points by the end of 2024.

Andrew Lipow, president of Lipow Oil Associates, said the Fed's interest rate decision was within expectations and would have a limited impact on the oil market.

The U.S. Energy Information Administration (EIA) said crude oil inventories unexpectedly fell last week as exports increased and refineries continued to increase production activity.

The American Petroleum Institute (API) also reported that crude oil and gasoline inventories fell last week, while distillate stocks rose.

Analysts note that oil prices are setting the stage for further gains due to supply issues and larger U.S. production cuts. This is a plan that OPEC+ hopes to realize soon, as the United States cannot keep up with its continued oil production to fill the gap of OPEC+ production cuts. With U.S. production now back down and even Russian supplies facing some delays, the upside is being squeezed.

Elsewhere, attacks in Ukraine on Russian refining assets pushed crude prices higher in the near term as market participants assessed the impact on crude and fuel supply balances.

"If these disruptions continue, it could eventually force Russian producers to reduce supply if they are unable to export all their crude," ING analyst Warren Patterson said.

From a technical point of view, U.S. crude oil hit the upper rail of the rising channel on Tuesday. After falling on Wednesday, it strengthened the signal of further short-term correction. Investors need to be vigilant. The 10-day moving average is supported near the 80 mark, and the 21-day moving average is supported near 78.87.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Crude Oil Trading Alert: After the Federal Reserve’s decision, the oil market explores a way out—challenges under the intersection of demand concerns and supply pressure

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