Crude oil price analysis amid heightened oversupply concerns

The crude oil price remains range-bound as oversupply concerns toned down the market’s reaction on Fed interviews. Investors are also keen on the Russian sanctions set to take effect on 21st November. The market is expected to remain in a rather tight range amid the mixed signals.

Crude oil price range narrows amid mixed signals

In October, the benchmark for global oil, Brent, traded within a rather broad price gap of close to $7, while WTI oil traded between $56 and $63. That gap has narrowed in November, with Brent crude oil price hovering between $62.50 and $65.50 a barrel. 

Even with the range-bound trading, the bulls have an opportunity to fuel an upward momentum as the market reacts to news on Fed Chair interviews. President Trump announced that his administration has begun interviewing for the next Fed Chair. 

The US President has constantly criticized Jerome Powell for holding interest rates steady. Indeed, the announcement comes at a time when the financial markets are pricing in a hawkish tone from the central bank during its December meeting.

Investors expect Trump’s pick to be one who appeals to his desire for lower interest rates. In fact, he has asserted that he has already identified his choice, adding, "I'd love to get the guy currently in there out right now, but people are holding me back.” Lower borrowing costs tend to bolster crude oil demand, pushing prices higher. 

However, crude oil price gains may be curbed by the oversupply concerns. Data released by the American Petroleum Institute (API) on Tuesday indicated that crude inventories in the world’s largest crude consumer rose by 4.45 million barrels in the week that ended on 14th November. In the previous week, the stocks rose by 1.3 million barrels, bringing the year’s net gains to 9.3 million barrels. 

In the same week, the US Department of Energy reported that crude oil inventories at the Strategic Petroleum Reserve surged by 500,000 barrels. Besides, US oil production hit a fresh record in the first week of November. According to the EIA, the reported levels are 299,000 bpd higher than at the beginning of the year.

In addition to the official government figures, the market is also eyeing the Russian sanctions due on 21st November. Notably, the risk of losing oil from Russia, the third largest oil producer across the globe, is supportive to the prices. However, in the immediate term, the market is at ease after loadings commenced at Russia’s Novorossiysk export hub. This is after the Ukranian attack and subsequent suspension of operations. 

USO crude oil price technical analysis

The USO ETF  price edged higher on Wednesday after trading sideways in the previous two sessions. The rebound, which secured its position back above the short-term 25-day and medium-term 50-day EMAs, has seen it trade at its highest level in a week. 

On its daily chart, the ETF is trading at a relative strength index (RSI) of 54. While this points to sideways trading, it is also an indication that it has ample room for further rebounding. 

In the short term, USO oil price will likely remain within the range of between $69.87 and $73.82. However, in the near term, an even narrower range of between $71.22 and $73.03 may define the asset’s price movements.