A larger-than-expected drop in US crude oil inventories is lifting crude oil price on the Brent benchmark this afternoon. The Energy Information Administration reports that the crude oil inventories dropped by 700,000 barrels in the week ended. This figure represents a marked fall from last week’s surplus of 4.6 million barrels, and this week’s consensus figure of 4.1 million barrels.
The result led a brief intraday push on the Brent crude oil price benchmark, sending it 3.13% higher before it retreated. Earlier today, Reuters reports which quoted the Saudi Press Agency indicate that Saudi Arabia has renewed calls for the OPEC + alliance to deliver further production cuts. These calls came as Saudi-state owned oil firm Aramco announced a 25% drop in Q1 2020 profits.
Earlier today, OPEC had released its monthly crude oil price forecasts. The oil cartel expects global demand for crude oil in 2020 to drop 9.07 million barrels per day as a consequence of the coronavirus pandemic. This downgrade in demand represents a nearly 30% drop over previous demand forecasts. This outlook may have served to limit the reaction of crude oil price to the inventory shortfall.
Brent crude presently trades within a small consolidation triangle, which can be combined with the previous bullish breakout from the wedge to form a bullish pennant. Attainment of the next resistance at 31.60 will require a breakout from the pennant. Price projection from the pennant is expected to equal the length of the pole, which takes the measured move to the 41.43 price level. However, such a move must overpower resistance areas at 35.61 and 38.56 to be actualized.
On the flip side, a return of risk-off sentiment could bear down on prices, forcing a breakdown and invalidation of the pennant. This scenario opens the door towards the 28.38 support levels, with 24.68 and 22.35 coming closely behind.