Crude oil price on the Brent variety soared on Wednesday despite a higher-than-expected rise in crude oil inventories. The EIA reported a rise in crude oil inventories of 7.5m barrels, which was higher than the 3.2million barrels overstock the markets predicted and also higher than last week’s stockpile figures of 3.4million barrels.
The rise in crude oil price can be attributed to general risk on sentiment on the day which saw risky assets and global markets soar across board. Crude oil price on the Brent variety is now trading at 55.84.
It remains to be seen if this upside will be capped by the news from the Organization of Petroleum Exporting Countries (OPEC), in which the body lowered its 2020 global crude oil demand forecast by 200,000 barrels per day (bpd) to 29.3 million (bpd). OPEC said that this was due to the coronavirus outbreak.
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Technical Outlook for Crude Oil Price
The price of Brent crude oil is now challenging the neckline of the evolving W pattern, which also corresponds to the 55.59 support-turned-resistance. Further upside can be expected if Brent crude is able to register two successive closing penetrations of the daily candle above this neckline, with the 2nd candle closing above the highs of the candles of Feb 3, Feb 4 and Feb 6. Supporting this upside move is the divergence signal that has been noticed on the chart.
If this plays out, then we can expect a possible test of the 57.47 resistance area. A break of this level then targets 58.69 and 60.62, in that order.
Failure to break the neckline will invalidate the W pattern and open the door for further downside action, which targets the next support at 53.26