Oil Prices Surge on Fed and DOE Reports

Oil Prices Surge on Fed and DOE Reports
The WTI and Brent benchmarks posted strong gains Wednesday.

The West Texas Intermediate (WTI) and Brent crude oil benchmarks posted strong gains Wednesday, bolstered by bullish indicators from U.S. Federal Reserve Chairman Jerome Powell and the U.S. Department of Energy (DOE)

“The talk from Fed Chairman Powell prior to his House testimony gave rise to thoughts that the Fed will decrease short-term interest rates at the upcoming Federal Open Market Committee meeting at the end of this month,” Steve Blair, senior account executive with the RCG Division of Marex Spectron, said, also referencing bullish U.S. oil inventory statistics from DOE’s Energy Information Administration (EIA). “This, along with the positive weekly DOE report this morning, brought a wave of buying into the petroleum complex that continued through the trading day. US Dollar Index futures seen moving lower also helped as it helps to increase buying power.”

As a Bloomberg article posted to Rigzone earlier in the day noted, ongoing tensions in the Middle East contributed to the midweek rally.

The August WTI contract price added $2.60 Wednesday, settling at $60.43 per barrel. The light crude market traded within a range from $58.35 to $60.53.

“WTI futures over the past several weeks had been languishing in a congestion range between $56.04 and $60.38, as seen on the daily continuation chart,” said Blair. “There has been a downward sloping trendline of resistance stemming from late April 2019 and today’s settlement closed above the trendline on both charts. This pattern of breaking out of the congestion pattern and above the resistance trendline confirms that this market has broken out to the upside.”

Blair added that the weekly WTI chart shows a downward trendline of resistance at $61.03 for the week ending July 12, noting that at close above that level would confirm the upside breakout. Also, he said that further resistance is seen at $61.02 and then at $62.60. Moreover, he noted that major support is now seen at the breakout levels of $59.93 and $59.30.

Brent crude oil for September delivery settled at $67.01 per barrel during midweek trading, reflecting a $2.85 gain. Blair noted that, like the WTI, Brent broke through its recent congestion range. He added that – unlike its counterpart – the Brent’s downward-sloping trendlines of resistance are much further above the market and stem back to early October 2018.

“However, with that said, the market has closed above the congestion range and further resistance seen at $67.77 and at $68.38, as seen on both the daily and daily continuation charts,” said Blair. “The weekly chart for Brent showed the downward trendline of resistance, for the week ending this Friday, at the $70.57 level.”

The August reformulated gasoline (RBOB) contract gained eight cents Wednesday, settling just under $2.01 per gallon. Blair commented that August RBOB has broken out of the congestion pattern at $1.9421. He noted that it is breaking above the downward trendline of resistance on the daily chart, closing right below that point Tuesday. In addition, he said that major resistance is now seen at $1.9953 and then $2.0325.

“Gasoline has often been the leader of the petroleum complex the last few months, and it is continuing this pattern with the August Gas Crack spread substantially widening today although the Heat Crack Spread also seen very strong in today’s trading session,” Blair said.

Henry Hub natural gas also finished higher Wednesday, with the August futures contract gaining two cents to settle at $2.44.

“August natural gas yesterday finally broke back to the upside on the back of summer weather finally arriving in much of the Lower 48 as we moved into the holiday weekend,” said Blair. “Technically, the close above the $2.399 level was very important for this market, and the market showed some follow through early in the trading session. A close above the near-term resistance as seen on the daily continuation chart at the $2.447 level would confirm that the market is headed toward the low to mid $2.50s.”


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