Light crude oil futures are making minor gains following their recent low due to President Trump’s revocation of Chevron’s Venezuelan operations license. This policy reversal has reinvigorated supply concerns as traders reassess their positions. Unexpected reductions in U.S. crude stockpiles and anticipated U.S. government purchases for the Strategic Petroleum Reserve are also impacting market dynamics, creating a cautious sentiment overall.
On Thursday, light crude oil futures demonstrated modest gains, rebounding from a previous low of $68.36, which marked the most significant decline since December 27. The immediate support level is observed at $67.06, while resistance occurs at the Fibonacci level of $70.35, alongside the 200-day moving average at $70.60, posing challenges for bullish momentum. At 11:35 GMT, futures were trading at $69.40, reflecting an increase of $0.78 or 1.14%.
The rise in oil prices can be attributed to President Donald Trump’s decision to revoke Chevron’s operating license in Venezuela. This move reverses a license issued by former President Joe Biden two years prior, as Chevron, which exports approximately 240,000 barrels per day from Venezuela—over 25% of the nation’s total output—faces a ban on exports following this policy change.
The cancellation of the Venezuelan license has renewed supply concerns in an already volatile market. Traders are reassessing short positions established during the recent sell-off, compounded by speculation regarding potential purchases for the U.S. Strategic Petroleum Reserve (SPR). Trump’s indication of quickly replenishing the SPR contrasts his previous criticism of Biden’s use of the reserve to reduce gasoline prices, adding a layer of support to the market.
Last week’s Energy Information Administration (EIA) data revealed an unexpected decrease in U.S. crude stockpiles, dropping by 2.3 million barrels to 430.2 million. Conversely, stocks at the Cushing, Oklahoma hub saw an increase of 1.3 million barrels, reaching the highest figures since November. Gasoline inventories rose by 400,000 barrels, while distillate stockpiles surged by 3.9 million barrels, surpassing predictions, with refinery utilization climbing to 86.5%, demonstrating strong refining activity.
While light crude futures have experienced a slight rebound, market sentiment retains a bearish outlook. Resistance levels near $70.35 and $70.60 may impede upward movement unless substantial bullish catalysts arise. Additionally, the unexpected increases in gasoline and distillate stocks, alongside geopolitical uncertainties concerning Trump’s interactions with Russian-Ukrainian peace discussions, further contribute to market caution.
Traders should remain vigilant for any prospective SPR purchases and developments concerning Venezuelan crude supply. A breach of the $67.06 support level could induce a deeper sell-off, while surpassing $70.60 might initiate a more considerable recovery. Currently, the market appears bearish; however, possible shifts in reserve buying strategies and geopolitical dynamics may influence sentiment significantly.
In summary, light crude oil futures have rebounded slightly following a low point, attributed to geopolitical changes and supply concerns regarding Venezuela. President Trump’s revocation of Chevron’s license enhances short-term apprehensions about oil supply, while potential government purchases of crude for the Strategic Petroleum Reserve may provide temporary market support. Market participants should remain alert to important price levels and external factors that could shift sentiment indefinitely.
Original Source: www.fxempire.com
