The price of crude oil jumped in overnight trading as investors reacted to the inventories data released by the Energy Information Administration (EIA). This data is usually released every week by the organization. The data released showed that inventories declined by almost 10 million barrels. This was a sharper decline than the 3 million that investors were expecting. It was also a sharper decline than the previous week’s decline of 1 million barrels. In total, the US crude inventories stand at more than 459 million barrels, which is 4% above the five-year average. This is the first time this year that the inventories have risen above this level.
The report by the EIA showed that US oil imports averaged more than 7.3 million barrels, which was 284k lower than the previous week. In the past four weeks, the imports have averaged more than 7.3 million barrels per day. This is 12.3% less than the same four-week period in the previous year. In addition, the distillate fuel inventories rose by 3.7 million barrels and are 5% below the 5-year average Further, the total crude oil products supplied over the past four-week period averaged 20.9 million barrels per day, which was 2.5% higher than the same period last year.
Investors are also reacting to the geopolitical issues in the Middle East. Last week, the United Kingdom navy intercepted an Iranian tanker that was supplying crude oil to Syria. In response, it was reported that a British oil tanker was being harassed by Iranian boats in the Strait of Hormuz. The boats were then forced to retreat after receiving a warning from British warship, HMS Montrose. The warship positioned itself between the boats and the tanker and issued verbal warning. In response, the Iranian revolutionary guard rejected that they had tried to stop the British tanker.
The upward trend could also be attributed to the Fed chair statement. In his testimony, he pledged to do whatever he could to ensure that the US growth is sustained. Investors interpreted this to mean that he was prepared to slash interest rates. This would be a positive thing for the oil market because it would mean a higher demand.
On the chart below, the price of Brent has continued to move higher, and today, it reached a high of $67.25. The price is above the 21-day and 14-day moving averages while the RSI has moved above the overbought level of 70. The average true range indicator has continued being subdued. The pair will likely continue moving higher as tensions rise.