Light Crude Oil Futures Rebound Amid Chevron’s Venezuela License Revocation

Light crude oil futures have rebounded slightly, trading at $69.40, following President Trump’s revocation of Chevron’s Venezuela operating license. This policy change has heightened supply concerns and the potential for U.S. Strategic Petroleum Reserve purchases is supporting market stability. However, resistance levels around $70.35 and $70.60 pose significant challenges for sustained upward movement amidst cautious market sentiment.

Light crude oil futures exhibited modest increases on Thursday, recovering somewhat after hitting a low of $68.36—their lowest point since late December. Technical indicators reveal a mixed forecast for oil prices, outlining immediate support at $67.06 and resistance at the Fibonacci level of $70.35. Additionally, a notable challenge for bullish momentum exists at the 200-day moving average of $70.60. As of 11:35 GMT, light crude oil futures are trading at $69.40, marking an increase of $0.78 or +1.14%.

The turning point for oil prices came following President Donald Trump’s decision to revoke Chevron’s license to operate in Venezuela. This abrupt policy change negates the previous license granted by former President Joe Biden over two years ago. Chevron, which typically exports approximately 240,000 barrels per day of Venezuelan crude—accounting for over 25% of the nation’s total output—will now be barred from proceeding with such exports.

This alteration in policy has revived supply concerns in a market already experiencing sensitivity, leading to the unwinding of short positions amid recent selling pressure. Traders are also gauging the potential for heightened demand following indications of possible purchases for the U.S. Strategic Petroleum Reserve (SPR), adding further complexity to the market dynamics.

The prospect of the U.S. government buying crude oil to replenish the SPR has provided additional support to oil prices. Last week, President Trump asserted his administration’s intention to swiftly refill the SPR, contrasting his criticism of Biden’s previous strategy to utilize the reserve to reduce gasoline prices. If executed close to current levels, governmental purchases could establish a temporary price floor for crude oil.

Recent data from the Energy Information Administration (EIA) revealed an unexpected decline in U.S. crude inventories, dropping by 2.3 million barrels to 430.2 million barrels, defying expectations for a 2.6 million-barrel gain. However, stockpiles at the Cushing, Oklahoma hub increased by 1.3 million barrels, reaching 24.6 million barrels, the highest since November.

Meanwhile, gasoline inventories saw a rise of 400,000 barrels, totaling 248.3 million barrels, while distillate stocks surged by 3.9 million barrels, significantly exceeding predictions of a 1.5 million-barrel decline. Refinery utilization rates have also climbed to 86.5%, indicating vigorous refining activity despite the mixed inventory figures.

Although light crude oil futures have shown slight recovery, market sentiment remains wary. With resistance near $70.35 and $70.60, any upward movements may confront considerable obstacles unless significant bullish catalysts are introduced. Worries over the unexpected increase in gasoline and distillate stocks, coupled with geopolitical uncertainty surrounding discussions on Russian-Ukrainian peace talks initiated by Trump, contribute to a bearish sentiment.

In the short term, traders should monitor potential SPR purchases and developments surrounding Venezuelan crude supplies. Should the market decline below the $67.06 support level, it could incite a more profound sell-off; conversely, breaking through $70.60 might lead to a more robust recovery. Presently, the market appears cautious, although strategic reserve purchases and evolving geopolitical landscapes have the potential to swiftly alter market perceptions.

Further insights can be found in our Economic Calendar.

In summary, light crude oil futures are experiencing a modest resurgence following the revocation of Chevron’s license to operate in Venezuela by President Trump. This unexpected policy reversal raises supply concerns while the potential for U.S. governmental purchases could provide a cushion for prices in the near future. Nonetheless, the market outlook remains cautious, with resistance levels posing significant obstacles to bullish trends.

Original Source: www.fxempire.com