Oil Price Hits Resistance with a Large Inventory

Crude oil prices hit resistance this week as US authorities reported a larger-than-expected build in wild stocks.

USOIL – Daily Chart

USOIL – Daily Chart

Oil was trading at $78.22 on Thursday after a recent surge hit resistance from the November 2023 levels.

Since mid-December, when crude futures were at a seasonal low, oil has climbed higher to test $48 per barrel. The usual seasonal pattern often sees crude oil bottoming in December or January before rallying into May.

In the US summer months, beginning in May, markets usually see increased demand for gasoline as people take vacations and drive more often. While gasoline demand usually appears in May, refiners purchase crude oil in January to allow time to refine and deliver the gasoline.

Also, a seasonal pattern for lower prices pushes prices down for year-end tax purposes in December. Refiners of crude oil flush their gasoline and heating oil pipelines to avoid paying taxes on unused products by the end of a calendar year.

Crude oil usually sees a price decline when new supply comes to the market. That pattern happened again in 2024, but some tightness may return to oil markets with tensions overseas.

A recent Reuters survey of 40 economists this week predicted an average price of $81.13 a barrel for this year’s front-month contract. That will depend on the appetite of OPEC for oil below $80, which was a previous target for the oil cartel.

With seasonal pressures out of the way, markets may focus on overseas tensions. OPEC could surprise markets and take them to a more comfortable place.

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