Market Considerations and Analytics
Key Notes
- Test of WTI prices Target pricing range for Biden’s SPR
- The artificial price floor in WTI crude oil is one of the technical factors why EIA data shows increased drawdown of crude stocks over the past week. ($67-$72)
The special petroleum reserves (SPR) are scheduled to be refilled within a price bracket of $67 and $72, a threshold that crude oil prices have now hit, according to a clear guidance by the Biden administration. The acquisition of oil to replace SPR reserves is expected to provide an unsustainable price floor for WTI, especially in light of the declaration made in May that up to 60 million barrels will be bought at lower prices the following year. Given that 2023 is drawing nearer by the day, participants in WTI will undoubtedly be closely monitoring rates from it
In an attempt to keep harmonious market conditions, the purchases are more likely to be made over time in smaller increments, which shows a steadier floor price developing as contrasted to a rapid jump higher on a single transaction.
LARGER DRAW THAN EXPECTED, PER EIA DATA
For the week concluding on December 2, the Energy Information Agency (EIA) released storage data, which revealed a larger drawdown on stocks than expected. As a result, crude appraisals are currently supported. The 5.2million barrel decrease outperformed the -3.3million barrel projection.
The technical analysis of WTI crude oil
WTI Crude prices have experienced a significant decline so far in H2, falling below numerous points of support and Fibonacci retracement thresholds along the way. Price action is currently bordering the upper level of the Biden administration’s $67-$72 band and has lately slipped underneath the 78.6% retracement of the 2021–2022 major rise at $77. Although price movement seems to be respecting this level, it is not impossible for prices to climb to $67 in the meantime.
The MACD measure indicates that impetus is being held in check, while the RSI has not yet reached oversold territory, indicating that further drop is still possible despite the artificial floor. Providing support costs $72, $67, and $62 (full Fibonnaci retracement). Resistance continues at $77, then comes $88.40.
