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Crude Oil Fails at $41 Again – Could Move Lower on U.S. Inflation

Crude Oil prices
Crude Oil prices

Crude oil prices failed to find new ground above the $41.00 level and this level will define the week ahead. Oil prices were strong last week on the revival of the U.S. stimulus package. Any stimulus for struggling economies would be a boost for oil demand in the short-term.

Crude oil was also supported by weekly EIA inventories, which showed a build of 500,000 barrels for the week previous, but there were larger-than-expected declines in gasoline and distillates. Production figures were also higher than analyst estimates.

Another OPEC production cut was expected for January of 2021 and this will continue to add some headline risk to crude. The current expectation was for a cut of 2 million barrels per day but reports last week by the WSJ said Saudi Arabia was looking at canceling those cuts.

Inflation rates for the U.S. economy tomorrow could see a big move in oil due to the impact on the U.S. dollar. The Federal Reserve has suggested continued stimulus until they reach their desired 2% inflation target, yet the potential for hotter prices would reduce that timeline and see a move higher in the U.S. dollar and drop in commodities. 

Crude Oil Technical Outlook

Crude oil bounced lower from another test of the $41.00 level and the 50-day moving average. This level will now define the week ahead. Currently, the path is lower to $37.20, however, a close above $41.00 would see a push back to resistance near $43.50. The Investing Cube team is currently available to assist new crude oil traders with one-to-one coaching.    

Crude Oil Daily Chart