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Crude Oil aiming for $40, remains bullish

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Crude Oil prices rallied yesterday as US commercial stockpiles show a slower pace of inventory build up

The weekly Crude Oil inventories report released by the U.S. Energy Information Administration yesterday showed that U.S. commercial crude inventories increased by 1.3 million barrels last week which were lower than the forecasted 2.9 million barrels. As of the week ending March 11th, the total U.S. commercial crude inventory rose to 523.2 million barrels, still considered to be historically high. The report comes after Tuesday evening the American Petroleum Institute (API) reported that inventories rose by 1.5 million barrels for the week ending March 11. This was below the forecasted increase of 3.3 million barrels. The API report also showed that gasoline supplies fell by 1.2 million barrels and distillate stockpiles fell by 830,000 barrels. Oil prices, however, settled the day on a bullish note closing at $38.59 a barrel with 5.25% gains.

The outlook for Oil is that both OPEC and the International Energy Agency (IEA) expect Crude Oil production to fall this year at the expense of US shale operators. Saudi Arabia along with Russia and other Oil producing nations continue to push ahead with arrangements in order to curb the falling prices in Oil, which have also started to take a toll on Saudi Arabia. However cracks still appear as Iran remains committed to keeping oil production high in order to make up for its lost market share, an issue that has been the major point of debate among other countries willing to freeze Oil production.

At the current production levels, supply continues to outstrip demand by nearly 2 million barrels a day.

Crude Oil Technical Outlook

Oil remains bullish on the weekly chart with prices now comfortably trading above the $38.25 handle. The bullish momentum could see Oil gains push prices towards the 45.44 – 44 handle which marks a strong support level last seen in September of 2015 which was eventually broken. Establishing resistance at this untested resistance could see some pullback in Oil above the $38.25 major support.

Crude Oil Weekly Chart – Bullish continuation to 44.5/44.0
Crude Oil Weekly Chart – Bullish continuation to 44.5/44.0

The daily chart remains bullish with the pullback near the $38.25 handle being brief. To the upside $42.80 is likely to be a short-term resistance from the 200 days MA. With prices breaking out the falling trend line and clearing the resistance at $38.25, further upside is likely to prevail.

Crude Oil – Daily Chart, watch for dynamic resistance near the 200D MA
Crude Oil – Daily Chart, watch for dynamic resistance near the 200D MA

On the 4-hour chart, while prices briefly struggled near the $38.25 – $38.10 resistance, prices eventually broke higher to post a new high. The declines could see support being established at this level, which would confirm further continuation in prices.

Crude Oil – H4 Chart Support likely to be established at $38.1 - $38.25
Crude Oil – H4 Chart Support likely to be established at $38.1 – $38.25

To conclude, Oil prices remain bullish as per our previous week’s outlook for Crude Oil. If support is confirmed near the $38.10 – $38.25 Oil prices could see further upside. On March 20th some of the Oil producing nations will be meeting pushing ahead with the production freeze plans which still remains uncertain at this point, however with talks of stabilizing the Oil market continuing WTI Crude Oil futures could be looking towards posting a moderate recovery

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