Oil’s breakneck rally is taking a breather as a smaller-than-expected drop in US crude stockpiles bolstered technical resistance to further gains.
(Bloomberg) — Oil’s breakneck rally is taking a breather as a smaller-than-expected drop in US crude stockpiles bolstered technical resistance to further gains.
West Texas Intermediate futures were little changed after a government report showed US inventories declining 2.14 million barrels last week, less than the 5.25 million-barrel drop reported by the industry-funded American Petroleum Institute. Still, stockpiles in Cushing, Oklahoma, dropped to 23 million barrels, only around 2 million barrels away from minimum operational levels.
Crude has roared higher the past three weeks thanks to supply curbs from OPEC+ linchpins Saudi Arabia and Russia, as well as brighter outlooks in the two biggest economies, the US and China. The upswing has reignited talk of a return to $100 oil, which may be a headache for central bankers, including Federal Reserve policymakers who’ll release a decision later Wednesday.
Brent crude slipped to trade near $94 a barrel while West Texas Intermediate’s more-active contract hovered near $90 a barrel. Crude has been flashing overbought on a technical basis for several days, suggesting the climb to a 10-month high may have been overdone.
“The impressive run-up in crude oil prices had to come to a temporary halt, and today’s Fed decision on interest rates provides the perfect excuse to bank some money,” PVM Oil Associates Ltd. analyst Tamas Varga wrote in a note.
In addition, timespreads retain a strong tone. The gap between WTI’s two nearest December contracts was a little below $10 a barrel in a bullish backwardated structure, more than twice the figure a month ago.
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