WTI Crude Oil Gains Despite EIA Inventory Build: Red Sea Tensions in Focus

Key Points

• WTI crude oil prices rise as Houthi attacks in the Red Sea intensify
• EIA reports unexpected 7.07 million barrel increase in US oil inventories
• Geopolitical risks offset bearish supply data, supporting oil prices
• WTI trading above $67.00, facing resistance near the 200-day moving average

Market Dynamics: Supply vs. Geopolitical Risks

WTI crude oil traded higher on Wednesday, with prices supported by escalating tensions in the Red Sea despite bearish inventory data. The US Energy Information Administration (EIA) reported a surprise build in US oil stockpiles, revealing a 7.07 million barrel increase over the past week. This unexpected surge contrasted with market expectations of a 2 million barrel drawdown.

The inventory build initially caused a slight pullback in WTI prices. However, the market quickly recovered, with WTI trading above $67.00 as geopolitical risks overshadowed the bearish supply data.

OPEC+ Production Increase

Over the weekend, OPEC+ announced plans to increase production by 548,000 barrels per day (bpd) in August. This follows a cumulative increase of 1.37 million bpd from April to July. Despite the additional supply, geopolitical risks, particularly in the Middle East, have limited downward price pressure.

Red Sea Attacks Elevate Risk Premiums

Recent attacks by Houthi rebels in the Red Sea have significantly increased risk premiums on oil. On Sunday, rebels launched a coordinated assault on the Greek-owned bulk carrier Magic Seas, forcing the crew to abandon the ship before it sank. The attacks intensified on Monday, targeting the Liberian-flagged, Greek-operated ship Eternity C. Several crew members were killed or went missing, and the ship sank early Wednesday.

These events have heightened concerns about oil transportation security in the region, supporting higher oil prices despite bearish supply fundamentals.

Technical Analysis: WTI Crude Oil

WTI crude is currently trading around $67.54, holding above the 50% Fibonacci retracement level of the January-April decline at $67.08, which serves as immediate support. The price faces resistance near the 200-day Simple Moving Average (SMA) at $68.16. A break above this level could pave the way for a move toward the 61.8% Fibonacci level at $69.98.

Support is reinforced by the 100-day SMA at $65.02 and the 50-day SMA at $64.07, which aligns with the 38.2% retracement at $64.18, creating a strong technical floor.

Momentum indicators present a mixed picture:

• The Relative Strength Index (RSI) reads slightly above the neutral level at 54
• The Commodity Channel Index (CCI) is marginally negative, reflecting some caution among bulls

Despite bearish pressure from rising inventories and increased OPEC+ supply, geopolitical risks in the Middle East continue to provide support for oil prices near key technical levels.