Crude Oil falls back, WTI tests $72.00 as oversupply concerns outweighs Middle East conflicts

• Crude Oil markets shrugged off the Houthi’s most successful ship attack to date.
• API Weekly Crude Oil Stocks figures due late in the day.
• Lagging Crude Oil demand in China is stepping up energy market concerns.

West Texas Intermediate (WTI) US Crude Oil softened on Tuesday, receding to $72.00 per barrel on renewed concerns that global production of Crude Oil will outpace growth by a much wider margin than initially expected. In 2023, Crude Oil markets initially anticipated that global production would undercut demand by a wide margin, drastically constraining supplies and sending barrel prices soaring, but lagging growth in key demand markets, specifically China, have sen market expectations of a supply rout about-face into renewed concerns of a worsening supply glut on the back of record pumping numbers from countries outside of the Organization of the Petroleum Exporting Countries (OPEC).

OPEC’s efforts to trim Crude Oil production have run up against a hard wall of increasing production from non-OPEC nations, specifically the US which hit a record production level in November and continues to cement itself as the world’s single largest barrel producer. China’s growth figures continue to come in below expectations, and wobbly Chinese Crude Oil demand leaves energy markets with far higher supply counts than anticipated.

The American Petroleum Institute (API) will be releasing a weekly update on US barrel counts, which last showed a surprise upswing of over 8.5 million barrels last week. The Energy Information Administration’s (EIA) own weekly barrel counts will print on Wednesday, and last saw a massive upswing in weekly Crude Oil stocks of over 12 million barrels.

A ceasefire in the Gaza conflict still seems unlikely, and Iranian-backed Houthi rebels in Yemen saw their largest ship attack victory yet when they forced the crew of the bulk carrier Rubymar to abandon ship on Monday. Houthis have struck at least four separate civilian vessels in the Red Sea since last week.

Despite multiple Middle East conflict concerns, Crude Oil markets hesitated on Tuesday, keeping Crude Oil pinned into rough, near-term consolidation.

WTI technical outlook

Near-term action in US Crude Oil has been rough, with WTI testing into $78.50 over the past week and barrel bids struggling to keep on the bullish side after Tuesday’s dip saw prices get hung up on the 200-hour Simple Moving Average (SMA) near $77.00.

Overall momentum has gone to the bulls as Crude Oil bids claim higher ground after dipping to $71.50 in February, but downside shocks remain a technical hazard for bidders.

Despite a halting recovery from recent lows near $68.00 per barrel, WTI remains down nearly 18% from 2023’s October highs near $94.00.

WTI hourly chart

WTI daily chart