WTI bulls move back in to test the recent output cuts

As the US dollar declines, WTI crude oil surges to test resistance once more. Reduced crude oil output keeps the price of black gold higher. On Tuesday, WTI oil prices increased by over 2% to $81.55 per barrel as investors prepared for data that would reveal additional reductions in US oil and fuel stockpiles. Also, a weaker US dollar has been positive for energy prices ahead of Wednesday’s potentially cooling inflation statistics.

On Wednesday, the US releases its Consumer Price Index, and analysts at TD Securities claimed that while the index still rose a robust 0.4% MoM, “core prices likely cooled off marginally in March.” The likelihood of future interest rate increases by the Federal Reserve is decreasing due to waning pricing pressures. As a result of the Fed’s predicted rate decrease by year’s end and a weaker US dollar, which makes oil cheaper for investments using currency other than the US Dollar, higher oil prices are supported.

With the prolonged suspension of 400,000 bpd of Iraqi crude oil shipments, tightness in the world’s oil supplies is supporting crude prices.

Looking at the fundamentals, a Wall Street Journal survey predicts that tomorrow’s weekly Energy Information Administration data will show a 1.7M barrel drop in petrol inventories and a 600,000 barrel dip in crude oil stockpiles. It would be the ninth straight fall in petrol stockpiles, and crude stockpiles would be at their lowest point since early February.

Following OPEC’s decision earlier this month to reduce crude oil output by approximately 1.1 million barrels per day in order to support prices and reduce global oil inventories, The Energy Information Administration on Tuesday increased its price forecast for Brent crude oil by 2.5% in the agency’s influential monthly Short-Term Energy Outlook. Due to decreasing supply, the agency increased its projection for Brent crude, the worldwide standard, from its previous US$83.00 objective to US$85.00 per barrel. The International Monetary Fund (IMF), on the other hand, predicted that global growth will be under 3% in five years, which is the lowest medium-term prediction in a Global Economic Outlook in more than 30 years.