Crude Oil Price Struggles Despite Steep Drop in Crude Oil Inventories

Summary:

Crude oil price is struggling for upside momentum despite a steep drop in crude oil inventories posted by the EIA for last week.

Data from the Energy Information Administration shows that crude oil inventories fell by 7.2 million barrels in the week ended June 24, 2020. This figure represents a more significant decline in crude oil stocks than the 900,000 barrels drop that the markets expected, and was also a steeper shortfall than the 1.4 million barrels added to crude oil stocks last week.
This report helps consolidate to a small degree, the gains made by Brent crude in the last two days as news of compliance by OPEC + members on agreed output cuts permeate the market. Brent crude is currently up by a marginal 0.14% and continues to hang on at $41.70.
Saudi Arabia appears to have cut its crude oil production by record amounts in June 2020, with exports falling by 5.7 million barrels per day, compared to the 6.2 million barrels that were exported per day in May 2020.

However, global demand continues to falter and the resurgence of the coronavirus seems to have slammed the brakes on risk asset trading today, with crude oil price suffering as a result.

Outlook for Brent Crude

Crude oil price touched off the 44.16 resistance nearly a week ago but was pushed back below the $40 mark. However, it is currently making a laboured move to the north, propped up by the ascending trendline. Upside momentum is weak, and the asset is struggling to make further impressions to the north.

A break above 44.16 is what Brent crude needs to re-establish recovery. This move has to overcome the resistance mounted by the 41.43 resistance line and requires good buying momentum, which is presently lacking.

If Brent crude fails to overcome the 41.43 resistance, this could prompt a pullback that could pressurize the ascending trendline. A breakdown of this trendline opens the door towards 38.56. Former resistance-turned-support levels at 35.61 and 31.69 remain the likely downside targets in line if 38.56 gives way.