Brent crude oil price predictions of a recovery in price got a boost this Wednesday after the latest report by the US Energy Information Administration (EIA) showed a sharp decline in crude oil inventories for the week ended 23 September 2022.
According to the latest report, crude oil inventories declined by 200,000 barrels, a sharp decline from the previous week’s addition of 1.1 million barrels. It was also a shortfall from the consensus of market analysts, who had predicted a surplus of 2.0 million barrels. Gasoline production increased in the week under review, topping 9.6 million barrels daily as refineries operated at 90.6% capacity. A drop in crude oil imports by 500,000 barrels a day was also a feature of the period under review.
Brent crude oil price consequently rose for a second straight day, adding 3.23% as the asset bounced off session lows. A weaker US Dollar is also helping to prop up crude oil prices, which recently hit 9-month lows after traders sold off commodities last week within the context of a risk-averse environment and a stronger US Dollar.
Tuesday’s bounce respected the descending trendline of the emerging falling wedge pattern. The intraday recovery on Brent crude has taken the price action to the wedge’s upper border. A breakout from here puts the price on the path toward a measured move that terminates at the 100.92 psychological price mark and site of the 13 July top. This move has to break above resistance barriers at 91.32, 93.20 (21 September high) and 97.40 (15 March low and 18 August high) to gain actualization.
On the flip side, rejection of the uptick at the wedge’s upper border and subsequent breakdown of the 86.72 (25 January low) and 83.12 (16 November 2021 and 7 January 2022 highs) support levels will invalidate the bullish outlook. This scenario will see 80.22 become the next downside target, being the location of a previous low of 4 November 2021.
This post was last modified on Sep 28, 2022, 17:18 BST 17:18