Crude Oil Jumps After Sudden Fall in US Inventories

Crude oil has had an interesting
week. On Monday, the price declined sharply after Donald Trump sent a tweet
asking OPEC to increase production with the goal of reducing the prices. This
came as the price of crude oil has gained by double digits this year. While
OPEC did not respond to the president’s comments, a few officials talked
anonymously to the media saying that it will be almost impossible for the
cartel to increase production. This is because OPEC+ members’ goal is to see a
price increase, which will help them support the economies.

In the recent years, the US has
been on both sides of the oil market. As a result of the increased hydraulic
fracturing, the country has boosted production and become the biggest oil
producer in the world. Every day, the country produces more than 12 million
barrels and last year, the country became a net crude exporter. As such, it
would be logical for the US to want higher prices, which will support the oil
companies. However, the US is also a major importer of crude oil, which means
that it would want the oil price lower. Also, multiple studies have concluded
that lower oil prices are usually better for a country.

In the past two days, the price
of WTI has recovered. This is because traders believe that OPEC will not heed
Trump’s call to increase production. The price has also been helped by the slowdown
in US inventories. Yesterday, a report by EIA showed that oil inventories
declined by more than 8.3 million barrels. Analysts were expecting an increase
in inventories of more than 2.8 million barrels. The report showed that the US
net imports of 162K barrels a day.

Yesterday, the price of crude oil
reached a high of $57.40. It then pared those gains and declined slightly to
just under the $57 mark. On the chart below, the price is along the 21-day EMA
and slightly higher than the 42-day EMA. The MACD has also declined slightly as
shown below. The XTI/USD pair will likely continue with the upward trend,
boosted by fundamentals.

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