Forex traders should take note of recent developments in the oil market, as these could influence currency movements, particularly for commodity-linked currencies.
The American Petroleum Institute (API) released a private survey on oil inventories with the following expectations: crude oil stocks rising by 1.7 million barrels, distillates falling by 0.15 million barrels, and gasoline inventories increasing by 2.5 million barrels. This survey, conducted among oil storage facilities and companies, differs significantly from the official government data due Wednesday morning from the US Energy Information Administration (EIA).
The EIA report is generally regarded as more accurate and comprehensive. It draws on data from the Department of Energy and other agencies, providing not only total crude oil storage levels but also detailed information on refinery inputs and outputs and storage levels segmented by crude grades such as light, medium, and heavy. Traders should prioritise the EIA numbers to gain a fuller picture of the oil supply-demand balance.
On the price front, crude oil markets experienced a largely unchanged session on Wednesday (Europe/US time), following a volatile trading day. The market moves were influenced more by political developments than by fundamental supply and demand changes. Prices initially softened overnight but then rallied during the European morning session without any clear fundamental trigger.
Market participants’ attention centred on US President Donald Trump’s high-profile presence at the Davos summit, which sparked intraday swings across risk assets. Geopolitical tensions provided some limited support after Trump reportedly warned that Iran would be “wiped off the face of the Earth” if it attempted to assassinate him. This heightened geopolitical risk added a modest premium to crude prices but faded later in the session.
Prices experienced mild downward pressure after reports emerged that India’s Reliance Industries plans to resume Russian oil purchases in February following a one-month halt. This news eased immediate concerns about supply disruption.
During President Trump’s formal Davos address, energy markets showed little reaction. However, sentiment shifted to a more risk-on tone after Trump clarified he would not use force against NATO in talks about a potential Greenland acquisition. Risk appetite further improved after he cancelled planned tariffs on European nations scheduled for 1 February, following a positive meeting with NATO Secretary General Mark Rutte.
Forex traders should monitor these geopolitical and supply factors closely, as they will likely influence the US dollar and commodity-linked currencies such as the Canadian dollar and Norwegian krone. The upcoming EIA report is particularly important for gauging near-term oil supply dynamics and market direction.
Original Source: Eamonn Sheridan of investinglive.com
