Oil prices erased earlier declines after government data showed a drop in US inventories, indicating that the spot market was tightening.
According to data from the US Energy Information Administration (Energy Information Administration), West Texas Intermediate Crude Oil (WTI) traded above $78 per barrel due to a decrease in crude oil inventories by 1.36 million barrels. This break shows that traders are viewing this news as the first bullish indicator among many bearish technical indicators.
Since the beginning of April, oil prices have been on a downward trend. There has been a decline in three of the past four weeks. Not only is the time difference weak, but processing profit margins are also weak. Meanwhile, the geopolitical premium brought about by Middle Eastern tension has subsided, and traders' attention has returned to the cooling market.
According to people familiar with the matter, an estimate from the American Petroleum Institute (American Petroleum Institute) on Tuesday predicted that US inventories would increase.
“The EIA's more reliable crude oil inventory data offset the sharp rise in API, which allowed some bears to make up for positions sold at the end of yesterday's session and this morning's trading,” said Dennis Kissler, senior vice president of trading at BOK Financial Securities.
A stronger dollar is an additional negative factor as commodities have become more expensive for many investors. The data showed that the US dollar rose for the third day in a row, and the fall of oil prices below the 100-day moving average also exacerbated the latest round of price weakness.
The Organization of Petroleum Exporting Countries (OPEC, abbreviation: OPEC) will hold a meeting next month to evaluate supply policies. The organization implemented production cuts in the first half of this year to support oil prices. According to a survey, most traders expect production cuts to be extended and may continue until the end of the year.