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’s more-active futures dropped below $90 a barrel after the Federal Reserve left its benchmark interest rate unchanged while signaling borrowing costs will likely stay higher for longer after one more hike this year. Traders fled risk assets, with the equities also falling.
“Crude prices are lower after the Fed delivered a hawkish skip and upbeat forecasts,” said Ed Moya, senior markets analyst at Oanda. “A small inventory drop and the risks that Fed policy will be restrictive a lot longer than initially expected is allowing energy traders to lock in some profits.”
The drop comes after crude’s 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. Crude has been flashing overbought on a technical basis for several days, suggesting the climb to a 10-month high may have been overdone.
Still, widely tracked measures of supply and demand reinforce signals that the market is tightening. US inventories declining 2.14 million barrels last week. Meanwhile, stockpiles in Cushing, Oklahoma, dropped to 23 million barrels, only around 2 million barrels away from minimum operational levels.
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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