Oil slumps on higher USD and renewed concerns of higher US production

• Oil slumps on higher USD after Powell Q&A testimonial session.
• Oil is also under pressure on renewed concerns of higher US production.

Crude oil/WTI is now trading around 62.89 in the New York session, down by 1.60% on higher USD and renewed concerns of higher US production.

The USD got a boost on Tuesday after the new Fed chair, Powell sounded more optimistic about inflation in his testimonial Q&A session than the initial prepared statement. In his Q&A session before the US Congress, Powell said that he sees “some high prices” (inflation) and he has strengthened his outlook for the economy since December’17.

The USD also got support after the new Fed chair Powell said that “market volatility won’t stop more rate hikes” in his first testimonial statement coupled with an upbeat US consumer confidence data later on.

Apart from a higher USD,  and negative for the black gold, were renewed concern about higher US oil production, affecting the morale of the oil bulls on Tuesday as concerns over mounting US production remains a key headwind for oil.

On Tuesday, IEA Chief said that the US is to be the largest oil producer by next year and sees US output exceeding 11 mbpd by late this year, overtaking Russia.

The United States will overtake Russia as the world's biggest oil producer by 2019, the IEA Chief Birol said on Tuesday: "US shale growth is very strong, the pace is very strong ... The United States will become the No.1 oil producer sometime very soon”.

US output was of 10.27 mbpd, according to government data released on Thursday, higher than the latest figures for the world's largest exporter Saudi Arabia and just below Russia.

Earlier, on Monday, crude oil prices were boosted by OPEC´s optimism, Libyan outage, a weaker US dollar, stronger Chinese demand for crude after China Jan crude oil imports jumped +21% m/m to a record 9.61 mbpd, and the increase in the crack spread to a 3-1/4 month high, which gives refiners incentive to purchase crude to refine into gasoline.

All eyes are now on the API weekly figures on US crude inventories later on Tuesday. US crude stocks are forecasted to have risen by 2.7 million barrels last week.

In addition to its weekly statistics, the US Energy Information Administration (EIA) will publish a monthly report on crude supply, which analysts expect to include substantial upward revisions to US oil output.

Technically, Oil now has to sustain above the 64.15 area for a further rally towards the 64.85-66.05 price zone in the coming days; else sustaining below 63.75/62.60-62.30, it may again fall to the 61.30-58.00 area in the coming days.