Crude Oil prices extended losses on Tuesday, dipping below the critical $70.00 mark following reports that Mexico’s Pemex has fully resumed operations across its oil platforms and export terminals in the Gulf of Mexico. Improved weather conditions mark the end of the hurricane season, bringing additional supply online and pressuring prices. Meanwhile, a robust US Dollar (USD) and rising supply expectations weigh further on the market.
Market Drivers: Pemex Resumes Production, Dollar Strengthens
Pemex, Mexico’s state-owned oil company, confirmed that all platforms and crude-export terminals in the Gulf of Mexico are now fully operational after closures due to severe weather conditions. With production back online, concerns about limited supply have eased, increasing downward pressure on prices.
In parallel, the US Dollar Index (DXY) trades firmly around 107.00, strengthening against major peers. The Dollar’s upward momentum follows Monday’s better-than-expected US S&P Global Purchasing Managers Index (PMI) for December, showing the services sector expanding at its fastest pace in 33 months. This reinforced investor confidence in steady US economic growth, boosting the USD and reducing oil’s appeal for non-USD buyers.
Investors are now shifting focus to the release of US Retail Sales data, expected to show 0.5% growth for November, and the Federal Reserve’s rate decision on Wednesday. The combination of robust economic data and expectations of a hawkish Fed stance further bolsters the USD, adding pressure on crude prices.
Supply-Side News: EU Sanctions and API Data
In geopolitical developments, the European Union (EU) has imposed sanctions on Dutch national Niels Troost for allegedly trading Russian crude oil above the Western-imposed price cap. This highlights ongoing efforts to limit Russian oil exports following the Ukraine conflict, though the immediate impact on global supply remains minimal.
Traders also anticipate the American Petroleum Institute (API) weekly Crude Oil Inventory report, scheduled for 21:30 GMT. Last week’s data showed a modest 0.499 million-barrel build. If the API reports another inventory increase, it could signal rising supply levels, further weighing on oil prices.
Technical Analysis: Crude Oil Faces Range-Bound Trading
WTI Crude Oil remains under pressure, trading in a tight range between $67.00 and $71.50. The rejection at last week’s high of $70.96 has solidified resistance near the 100-day Simple Moving Average (SMA) at $71.03. This level has proven difficult for buyers to breach, with selling pressure re-emerging ahead of year-end profit-taking.
To the downside, support is seen at $67.12, a level that held firm in May and June 2023. A break below this key level could trigger further declines toward the 2024 year-to-date low at $64.75 and the 2023 low at $64.38.
On the upside, immediate resistance lies at Monday’s high of $70.12 and Friday’s intra-day level of $70.96. A decisive move above these barriers could open the door to the pivotal $75.27 level, though upside momentum remains limited.
Outlook: Key Data and Fed Decision to Drive Oil Prices
Crude Oil prices are likely to remain under pressure in the near term as traders brace for API inventory data and the Federal Reserve’s rate decision. The resumption of Pemex’s operations adds supply to the market, while a strong US Dollar and rising Treasury yields reduce oil’s attractiveness.
Should API data show a significant build in inventories, it could exacerbate bearish sentiment. Conversely, unexpected inventory draws might provide modest support. However, with Fed hawkishness and year-end trading dynamics in play, downside risks for crude oil remain significant.
Crude Oil Under Pressure Amid Rising Supply
Crude Oil continues its bearish trend as supply increases with Pemex’s production resumption and the strengthening US Dollar. Technical resistance at $71.00 remains firm, with downside targets at $67.12 and $64.75 coming into focus. Upcoming API inventory data and the Fed’s rate decision will be key drivers for oil prices in the days ahead.
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