oil prices
Crude oil price maintains its stand above $41 but remains under pressure as crude oil inventories showed a lower-than-expected drop in US oil stocks. Data from the Energy Information Administration (EIA) showed that inventories dropped by 1.6 million barrels, which was far less than the 4.4million barrels drawdown of last week, and the projected 2.5m drop in stocks.
Data showed that refineries were operating at about 75% of total capacity and recovering output follows the lighter-than-expected damage to Gulf Coast facilities after Hurricane Laura had passed in August. Total supply of crude oil products in the last four weeks show a 16% drop from the same period in 2019, but inventories remain about 13% above the 5-year average when compared with the same period in 2019.
Today’s crude oil inventories data has done nothing to impact price action for the day, which remains bullish despite the lower-than-expected drawdown. A look at the daily chart shows that the price candles on Brent crude are forming lower highs, which could indicate that bullish momentum on the asset is weakening. Presently, the 39.57 support is still helping to prop up prices, but a decline from present levels will break down 41.43 and put the 39.57 support under pressure. If this level gives way, the door will swing wide for sellers to drive towards the 36.40 price target. Below this level, 33.82 and 31.06 form new downside targets.
On the flip side, a recovery in crude prices must follow the establishment of a higher high above 45.39. This will allow for a possible push towards 48.33 and possibly 50.64. However, there is a lack of fundamentals to drive this move, but as we gradually approach the winter period, colder weather may drive demand for derivatives and this may help lift prices.
