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Oil prices ignore inventory build up

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Crude Oil ignores comments from Saudi Oil minister and weekly inventory buildup but volatility likely to persist.

Crude Oil prices continued with the volatile swings ignoring the weekly build up in US Crude Oil inventory as well as negative comments from Saudi’s Oil minister early in the week.

The weekly Crude oil inventory report released yesterday, for the week ending February 19th showed a buildup of 3.5 million barrels against expectations of a buildup of 2.03 million barrels. Despite the increase in the stockpiles, stronger demand for gasoline helped Crude Oil to close Wednesday’s session in the green. Demand for Gasoline increased over 9 billion barrels per day, higher than the previous weekly increase of 8.6 billion barrels. Earlier in the week, Saudi Oil minister Ali Al-Naimi said “There is no sense in wasting our time seeking production cuts” quashing all hopes for an OPEC Oil production cut. The comments come just a week after Saudi and Russia agreed to freeze Oil production at January levels, which saw Oil rebounding off the $26 handle strongly. The agreement was joined by Kuwait, Venezuela and Qatar. It is learnt that Iran had agreed to the production freeze but did not sign up to the agreement as it maintained that it would keep increasing Oil production in order to make up for its lost market share. Oil prices rallied 2.75% yesterday to close near $32 a barrel.

Crude Oil Technical Analysis

Oil prices are currently trading near the previous low at 31.95 which came ahead of prices posting a lower high at 33.65. On the 4-hour chart, Crude Oil futures for April delivery has formed an inside bar near the 31.95 established support. A break below the low of 31.76 could see a decline to the previous lower support at 30.78. Below 30.78, the next support is at 29.76. To the upside, if Crude Oil manages to close above 32.39, further upside could see prices aim for 33.65 previous highs. However, the downside bias remains stronger following the break of the rising trend line, connecting the lows at 29.13 from 11th February and 31.95 close from 19th February.

WTI Crude Oil (April Futures) – H4 Lower highs
WTI Crude Oil (April Futures) – H4 Lower highs

The daily chart for Crude Oil shows prices consolidating within a descending triangle pattern near the current levels, which could point to a breakout in the medium term. Support to the downside comes in at $28.76, while to the upside 37.73 marks the upper resistance level.

WTI Crude Oil, Daily Chart – Triangle pattern
WTI Crude Oil, Daily Chart – Triangle pattern

In conclusion, Oil prices are likely to be volatile in the medium term with the consolidating triangle formed on the daily chart. On the H4 chart, there is scope for a dip to the downside towards $29.76 – $28.76.

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