Crude Oil gains as US weekly inventory posts one of the largest drawdowns
Crude Oil futures are up 5.19% this week after prices rallied strongly in the last 24 – 48 hours. The weekly EIA Crude oil inventories showed a surprising decline in commercial stockpiles which fell 5.88 million barrels last week against expectations of a surplus of 1 million. Yesterday’s decline in Crude oil inventories marks a second time in the past 13 weeks but was marked by the biggest drawdown in inventories. Oil prices gained over 3.90% yesterday while also opening the week on a bullish note with a gap higher. WTI Crude Oil opened the week at $35.84 against Friday’s lower close at $34.53. However, it was not all good news for Oil as OPEC noted that the global markets would be oversupplied into the end of the decade with estimates that global crude oil supply could reach 97.6 million barrels by 2020 while demand is expected to climb to 97.4 million barrels per day.
Over the week, the US has also approved in lifting its ban on Crude Oil exports which should be negative for prices over time.
Crude Oil Technical Analysis
The weekly chart for WTI Crude oil shows an interesting picture where prices are currently bullish after the doji candlestick was formed last week. The doji pattern comes just a week after a strong bearish Maribozu candlestick pattern was formed. A weekly close above the doji high at $37.87 could confirm a reversal with the high likelihood of prices rallying to the $43.40 mark which was previously a support level and one which could be tested for resistance on the rally.
The median line plotted on the weekly chart shows a possible move to the upper median line. A break out above $43.40 could see WTI Crude Oil rally towards the $50 handle. However, with $43.40 region likely to act as resistance, upside moves could possibly remain risked to the downside.
On the daily chart, WTI Crude oil has been trading within the falling price channel and is now nearing the $38.9 level of support which could be tested for resistance. A break higher could see a move to the $43.40 level of resistance from the weekly chart. However, there is scope for a move lower against the first resistance near $38.9 with the Stochastics on the daily chart also nearing the 80 region which marks the overbought level. A minor downside correction could be seen on the cards, before a move higher. A break below previous lows would however turn prices bearish.
With the markets likely to see low trading volumes over the next week, Crude Oil prices are likely to trade sideways. While the longer term trend remains biased to the downside, the potential rallies to the untested resistance levels near $40 and above are likely to attract new sellers into the market.
