A bullish close in crude oil yesterday should see further gains in the commodity this week. The price of WTI crude rallied 2.4% on Tuesday after tropical storm Laura was upgraded to a category 1 Hurricane, with officials stating that it could become a category 3 major hurricane by the time it makes landfall late on Wednesday or Thursday.
State emergencies were announced in Louisiana and Mississippi as Laura churned through the Gulf of Mexico, while the oil industry has been hit hard with employees evacuated from oil rigs and over 50% of production shut down in the gulf. The storm is also set to hit Port Arthur in Texas, which is home to the largest oil refinery in the U.S.
With the hurricane set to slow oil production, inventories data from the American Petroleum Institute saw a fifth-straight drawdown in crude stocks. The 4.5 million barrel draw was larger than expected and today’s data from the Energy Information Administration should confirm that oil inventories continue to fall from the glut seen during the Covid shutdowns.
Tighter crude oil stocks will keep a bid under the crude oil price and traders will be keeping a close eye on the effects of Hurricane Laura, while we also have the potentially market-moving Jackson Hole economic event tomorrow, which could bring comments on monetary policy from Federal Reserve officials and finance ministers.
Crude Oil Technical Outlook
The bullish close in the crude oil price has cleared resistance around the $43.00 area and should provide the platform for a run to the $44.00 level, where we also have a horizontal resistance line, which provided support for the market during the March price plunge.
The only risk to higher prices would be a drop back beneath the $43.00 level, which and this would require a downgrade to the Hurricane and/or pro-dollar comments from the Federal Reserve this week.
Crude Oil Daily Chart