Crude Oil falls back despite supply declines ahead of anticipated OPEC+ meeting

West Texas Intermediate (WTI) US Crude Oil backslid on Thursday, with energy markets shrugging off a sharp downturn in reported US Crude Oil stocks. An upcoming meeting of the Organization of the Petroeum Exporting Countries (OPEC) and its extended network of non-member ally states, OPEC+, is broadly expected to extend current voluntary production cuts. OPEC+ kicks off its online-only meeting on Sunday, June 2.

The American Petroleum Institute (API) and Energy Information Administration (EIA) both reported sharp declines in US Crude Oil stocks this week, but energy traders are balking at a huge runup in refined products as refinery runs steeply outproduce demand. The API reported a -6.49 million barrel decline in US Weekly Crude Oil Stocks for the week ended May 24, while the EIA noted a -4.156 million barrel drawdown in Crude Oil Stocks Change for the same period. However, despite the sharp pulldown in Crude Oil supplies, energy traders were knocked back after the EIA reported that refinery-held Crude Oil rose 601,000 per day, notching in the highest level of held refinery crude since December of 2019. The EIA also reported that refinery utilization rates rose by 2.6%.

Holdings of refined Crude Oil products, including gasoline and Natural Gas storage holdings, both rose over the week through May 24, hobbling investment sentiment of Crude Oil markets. OPEC+’s upcoming production meeting is unlikely to resolve energy markets’ concerns.

According to three unnamed sources, OPEC+ is considering extending some Crude Oil output cuts into 2025, on top of an extension of current voluntary production cuts into Q3 or Q4 of 2024. OPEC+’s current voluntary cuts are already feeling underweight to barrel traders, and Crude Oil bids will be looking for more drastic action from the global oil cartel to crimp an possible overhang in production against global demand.

WTI technical outlook

WTI has steepened a near-term decline from this week’s early peak near $80.40, with US Crude Oil tumbling to an intraday low of $77.50 per barrel on Thursday. WTI is still holding above last week’s swing low near $76.00, but topside momentum remains limited and prone to whipsaws.

Thursday’s decline drags WTI firmly south of the 200-day Exponential Moving Average (EMA) at $79.15. A recent consolidation pattern is firming up between the 200-day EMA and recent swing lows below $77.00 per barrel.

WTI hourly chart

WTI daily chart