Light crude oil futures have rebounded slightly, recovering from a recent low. Prices currently sit at $69.40, fueled by President Trump’s cancellation of Chevron’s Venezuela operating license, which raises supply concerns. Unexpected draws in crude inventories and potential U.S. strategic reserve purchases provide market support, although an overall cautious sentiment persists with looming resistance levels at $70.35 and $70.60.
Light crude oil futures experienced a modest rebound on Thursday, recovering from a low of $68.36 reached in the previous trading session, which marked the lowest level since December 27. Current trading indicates a price of $69.40, reflecting an increase of $0.78 or +1.14%. Technical indicators show immediate support at $67.06, while the Fibonacci resistance level is noted at $70.35, alongside a 200-day moving average at $70.60 that poses challenges for upward momentum.
Oil prices strengthened following U.S. President Donald Trump’s decision to revoke Chevron’s operating license in Venezuela. This policy shift reverses a previous license granted by former President Joe Biden over two years ago. Chevron, which produces approximately 240,000 barrels per day from Venezuela—accounting for over 25% of the nation’s total output—will be prohibited from continuing these operations.
The cancellation of the license has reignited supply concerns in a market already sensitive to fluctuations, facilitating the unwinding of short positions initiated during a recent market downturn. Additionally, traders are now evaluating possible increases in demand due to reports suggesting potential purchases for the U.S. Strategic Petroleum Reserve (SPR).
The prospect of U.S. governmental purchases to replenish the SPR has further supported oil prices. Last week, President Trump expressed intentions to quickly refill the SPR, diverging from his prior criticisms of Biden’s strategy in using the reserve to lower gasoline prices. Should government purchases occur near current price levels, they may provide essential support to oil prices.
Recent data from the Energy Information Administration (EIA) revealed an unexpected decline in U.S. crude inventories, which fell by 2.3 million barrels to 430.2 million barrels, contrasting with expectations of a 2.6 million-barrel build. However, stock levels at the Cushing, Oklahoma hub increased by 1.3 million barrels, reaching the highest levels since November.
Furthermore, gasoline inventories rose by 400,000 barrels, totaling 248.3 million barrels, while distillate stocks surged by 3.9 million barrels, significantly surpassing predictions of a 1.5 million-barrel decrease. Refinery utilization increased to 86.5%, showcasing strong refining activity despite mixed inventory data.
While light crude oil futures exhibit slight recovery, overall market sentiment remains cautious. Resistance levels at $70.35 and $70.60 may hinder further upward movement unless strong bullish drivers emerge. The unexpected inventory builds and geopolitical uncertainties surrounding Trump’s peace talks with Russia and Ukraine contribute to a bearish market outlook.
In the near future, traders should monitor developments regarding potential SPR procurement and the state of Venezuelan crude exports. A breach below the $67.06 support level may prompt a more pronounced sell-off, whereas surpassing $70.60 could indicate a significant recovery. Currently, the market leans bearish, yet strategic reserve activity and geopolitical shifts have the potential to alter sentiment rapidly.
In summary, light crude oil futures have shown slight recovery amid fluctuating market conditions, notably influenced by the revocation of Chevron’s operating license in Venezuela. While the prospect of U.S. SPR purchases offers some support, mixed inventory data and ongoing geopolitical uncertainties maintain a cautious market atmosphere. Traders are advised to keep an eye on significant price levels and strategic developments that could impact future oil prices.
Original Source: www.fxempire.com
