Commodity Market: US Crude Oil eases from multi-year highs on profit taking, but losses limited by strong demand, fuel switching

Futures on US West Texas Intermediate Crude Oil eased on Thursday, as some investors took profits following the recent market rally. However, oil losses seemed to have been limited by strong US demand and a switch to fuel oil from coal and gas.

Oil prices reached fresh multi-year highs this week due to a global coal and gas crunch, which has forced many businesses to switch to diesel and fuel oil.

Additionally, the price surge comes at a time of supply tightening, as OPEC+ members have stuck to an existing pact for a gradual increase in oil output.

“We saw some correction, but overall sentiment remained firm as there have been no large increases in output by the United States or OPEC,” Satoru Yoshida, a commodity analyst at Rakuten Securities, was quoted as saying by Reuters.

“Brent could reach $90 a barrel later this year as tightness in global oil markets will likely continue as U.S. decarbonisation efforts will cap output increases while demand will increase as more power companies switch fuel from coal and gas.”

Meanwhile, refiners have been seeking to ramp up production in order to satisfy a synchronized increase in demand across Asia, Europe and the United States.

The latest oil inventory data also implied strong US demand. The official report by the US Energy Information Administration (EIA) showed yesterday that crude oil inventories had decreased by 0.431 million barrels to 426.5 million barrels during the week ended October 15th. Analysts on average had anticipated an increase by 1.857 million barrels.

Oil inventories at the Cushing, Oklahoma delivery hub dropped to their lowest level since October 2018 last week, while suggesting market tightness.

US gasoline inventories dropped by 5.368 million barrels to 217.7 million barrels last week, according to EIA data, while reaching their lowest level since November 2019.

As of 8:43 GMT on Thursday WTI Crude Oil Futures were retreating 0.70% to trade at $82.84 per barrel. Earlier in the trading session the black liquid climbed as high as $83.96 per barrel, which has been its strongest price level since October 16th 2014 ($84.83 per barrel). WTI Crude Oil Futures have risen 10.41% so far in October, following another 9.53% gain in September.

At the same time, Brent Oil Futures were losing 0.96% on the day to trade at $85.04 per barrel. Earlier in the trading session the commodity climbed as high as $86.08 per barrel, which has been its strongest price level since October 4th 2018 ($86.39 per barrel). Brent Oil Futures have risen 8.90% so far in October, following another 9.28% gain in September.

Daily Pivot Levels (traditional method of calculation) – WTI Crude Oil Futures

Central Pivot – $82.62
R1 – $84.45
R2 – $85.49
R3 – $87.32
R4 – $89.16

S1 – $81.58
S2 – $79.75
S3 – $78.71
S4 – $77.68

Daily Pivot Levels (traditional method of calculation) – Brent Oil Futures

Central Pivot – $85.13
R1 – $86.59
R2 – $87.33
R3 – $88.79
R4 – $90.26

S1 – $84.39
S2 – $82.93
S3 – $82.19
S4 – $81.46