Crude oil trading outlook: WTI futures hit 6-year bottom on US inventories, Fed eyed

West Texas Intermediate crude touched a fresh 6-year low on Wednesday after private data showed a tenth straight weekly jump in US crude oil inventories to a new record, while investors eyed the outcome of Feds two-day policy meeting.

US crude for delivery in May traded 1.22% lower at $44.64 per barrel at 8:01 GMT, having earlier fallen to a six-year low of $44.33. The contract slid 2.04% on Tuesday to $45.19 a barrel, a sixth straight daily loss. The April contract expires on March 20th.

Meanwhile on the ICE, Brent for settlement in the same month dropped 0.65% to $53.16 per barrel, having ranged between $53.55 and $53.01 during the day. The European crude benchmark fell 0.8% yesterday to $53.51 after it earlier touched $52.57, the lowest since February 2nd. Brent traded at a premium of $8.50 to its US counterpart, up from Tuesdays close at $8.32.

WTI revisited Tuesdays multi-year lows after data by the American Petroleum Institute showed that US crude oil inventories surged by 10.5 million barrels last week, setting up a new record, while stockpiles at the Cushing, Oklahoma storage hub jumped by another 3 million barrels and supplies of refined products slid only marginally.

Government statistics by the Energy Information Administration are expected to show at 14:30 GMT on Wednesday a 3.75-million-barrel jump in crude stockpiles, while motor gasoline supplies likely fell by 0.88 million barrels and distillate fuels declined by 1.08 million. A better-than-expected showing would provide some support for the market, but likely only in the short term.

Minor support has been recently drawn after Baker Hughes Inc. said on Friday that US oil explorers idled 56 rigs last week, cutting their number for a 14th straight week to 866, the lowest since March 25th, 2011. Producers have brought offline 709 rigs since early-December as a slump in oil prices that began in June forced spending cuts and layoffs by the thousands.

However, US crude output was at its highest in more than three decades, the EIA reported last Wednesday, as the biggest and higher-yielding shale wells continue to operate.

A slightly weaker US dollar helped ease pressure on oil, but investors remained bullish on the greenback in the long term. The Federal Reserve concludes its two-day policy meeting today where officials are broadly expected to drop the “patient” stance regarding an interest rate hike timetable, given Februarys upbeat employment data.

However, central bankers have voiced concerns of inflation failing to reach the targeted 2% level, largely due to low oil prices. Nevertheless, if boosting borrowing costs in the US were to be pushed back, this would likely cause a softening in the US dollar, but only in the short term as a hike would still be expected at some point this year.

The US dollar index June contract was 0.07% lower at 99.880 at 8:02 GMT, shifting in a daily range of 100.105 – 99.805. The contract slid 0.1% on Tuesday to 99.949, easing from Fridays 12-year high of 100.785.

Comments by Iran about higher production after a possible lifting of sanctions has kept a floor under prices, particularly Brent. Irans oil minister Bijan Namdar Zanganeh said on Monday that the Islamic Republic is ready to ramp up output by 1 million barrels per day, if international sanctions were removed. US-Iran talks continued on Tuesday in Switzerland after US and European powers showed willingness to compromise on suspending UN sanctions. The Persian Gulf nation exported 1.2 million barrels per day of oil in February, according to the IEA.

Pivot points

According to Binary Tribune’s daily analysis, WTI May futures’ central pivot point is at $45.26. In case the contract breaches the first resistance level at $46.17, it may rise to $47.14. Should the second key resistance be broken, the US benchmark may attempt to advance $48.05.

If the contract manages to breach the first key support at $44.29, it might come to test $43.38. With this second key support broken, movement to the downside could continue to $42.41.

Meanwhile, May Brent’s central pivot point is projected at $53.49. The contract will see its first resistance level at $54.40. If breached, it may rise and test $55.30. In case the second key resistance is broken, the European crude benchmark may attempt to advance $56.21.

If Brent penetrates the first key support at $52.59, it could continue down to test $51.68. With the second support broken, downside movement may extend to $50.78 per barrel.