- Summary:
- Crude oil prices have added support on the back of raging wildfires in Canada's Alberta region, which could cut off 400k bpd.
Crude oil prices came under pressure on Thursday as mixed economic data weighed in. Brent crude traded at $85.33, up by 0.2 percent in the intraday session, while West Texas Intermediate (WTI) was down by 1.4 percent to trade at $81.63. The dollar has weakened in recent days as the market positions itself for a likely Fed interest rate cut in September.
A positive demand-side outlook in the summer favours near-term upside by crude oil prices. US crude oil inventories declined for the third successive week, coming in at minus 4.87 million barrels, much lower than the forecast figure of minus 900k barrels for the week ended July 10. ECB President Christine Lagarde, while commenting on the bank’s decision to keep interest rates unchanged stated on Thursday that the Eurozone economy could be negatively affected by weakening global economic outlook. This will be interpreted as bearish for crude oil prices, which were already under pressure from China’s weaker-than-expected second quarter GDP growth.
That said, crude oil has substantial support from the supply-side, propelled by raging wildfires in Canada, which threaten to cut off 400,000 barrels per day from the market. Meanwhile the US economy continued to print out soft data, with Initial Jobless Claims rose to 243k, exceeding the forecast figure of 229k. This adding to the downward pressure on the dollar, which will provide support for higher demand for oil.
Technical analysis
The momentum on crude oil price signals control by the buyers, with the pivot at 85.27. The upside will likely continue if the price stays above that mark, with the first resistance likely to come at 85.55. A break above that mark will strengthen the upside momentum, and could see further advances to test 85.80. Conversely, if the price moves below 85.27, it will favour the sellers to take control. The first support will likely come at 85.04. Extended control by the sellers will break below that mark, thereby invalidating the upside narrative and potentially moving the price lower to test 84.70.
