The oil price is still trying to find a price low near the $80 level this week.
Oil has consolidated in a range from the $70-80 level over the last few months and lacks a real catalyst for a move.
USOIL – Weekly Chart
Oil currently trades at $80, and as long as it holds above $76, it is in good shape for a low price here.
China’s reopening has had traders anticipating a move higher over the year in oil. Still, the weaker US economy is weighing on prices.
Oil prices were lower on Tuesday after US inventories showed a rise of 3.4 million barrels. According to the API, US crude inventories rose by 3.37M barrels during the week ended January 20. The API reported back-to-back increases of 7.615M and 14.865M barrels in the previous two weeks.
Specifically for the Cushing, Oklahoma delivery point for US crude, the API reported a stockpile build of 3.928M barrels after the previous week’s rise of 3.7M.
Hedge funds and money managers have been piling into crude oil over expectations for a Chinese recovery. They purchased 89 million barrels over the seven days to January 17. The buying was the fastest rate since November 2020.
The buying wave was led by crude (USOIL) (+78 million barrels), especially Brent (UKOIL) (+55 million), and some more minor buying in NYMEX and ICE WTI (+23 million).
An OPEC production cut could also come this year as analysts believe the group has a target of $80-90 in oil. That could see them cut to boost prices in anticipation of higher Chinese demand later in the year and push oil to the higher end of the range.
There is also the issue of Russia and Ukraine with the potential for an escalation in the conflict. European governments gave the green light to send tanks to Ukraine, which has angered Russia. The conflict escalates, and the risk/reward likely favours the upside in oil prices.
