Pullback in oil prices was again limited to just one day

WTI oil prices didn’t continue Wednesday’s correctional decline, promptly winning back most of the losses. After the first trading sessions of the current year on January 3-4, there have been no more declining in oil prices lasting more than one day. It’s a good sign indicating that market participants intend to buy out drawdowns in anticipation of a new wave of growth.

Figures shown by statistics on U.S. reserves have again made no impact on market participants willing to buy oil futures, just like a week ago. After last week’s rapid surge in crude oil reserves by 19 million barrels, this time, statistics demonstrated an increase by 8.4 million barrels.

It seems that the surge in crude reserves is still attributed to lowered volumes of oil refining, because the oil refinery utilization increased by 1.2% only to the level of 85.3% over the week. This is still significantly lower than the level of 90%-92% that had been observed before the winter storm in December. It’s also necessary to take the seasonality factor into consideration, as stocks of oil and petroleum products tend to increase during wintertime, while more active spending might take place in spring.

In the future, spending of accumulated reserves may accelerate because oil sales from the US Strategic Petroleum Reserve (SPR) have finally stopped. After the release of about 230 million barrels of oil from the SPR to the market from November 2021 to January 2023, supply in the market may now decrease, which is a growth factor for the prices.

A new initiative of the Republicans may become another long-term factor of price growth, as the officials want to prohibit the President of the United States to make decisions on the use of the SPR, except in emergency cases.

Now the WTI oil price is facing the task to consolidate above the 81.5 mark, and then it will be possible to move towards the previous local high of 82.7.

The following trading strategy version might be offered:

Buy WTI oil at the current price. Take profit 1 – 81.5. Take profit 2 – 82.7. Stop loss – 79.5.

Traders may also use Trailing stop instead of a fixed Stop loss at their convenience.