Crude oil has recovered from a drop below the $40.00 level and should now make a push for the August highs at $43.50. Commodities are getting support from a drop in the U.S. dollar as the potential for a second stimulus package draws nearer.
Oil prices were hit by China’s third-quarter economic growth came in slightly weaker than expected, with a gain of 4.9% compared to analyst expectations for 5.2%. Traders are worried that surging coronavirus cases around the world are slowing demand for crude.
Data from the API and EIA last week showed that inventories in the U.S. had dropped as demand picked up following the relaxing of virus lockdowns, however that dynamic seems to be reversing once more. The EIA reported a 17 million bbl decrease to total U.S. inventories of crude and refined products for the week ending October 9th. The data was the largest decline seen since February 2019.
OPEC ministers are set to meet today as the organization comes under pressure to reverse their planned production cuts in light of the rise in virus cases. Libya has also seen a rise in daily production, which will complicate the supply side further as the country are not subject to OPEC rules. The 70,000-barrels-per-day Abu Attifel oilfield is set to restart production on October 24th after being shut down for two months.
Crude Oil Technical Outlook
Crude oil has recovered from a dip below the $40.00 level and has found buyers at the 50-day moving average. Oil trades at $41.10 and will now push for resistance at the $41.44 level, with the key target being the $43.50 highs from late-August. The $40.00 level could be a stop loss for longs for a 2.5:1 risk-reward play.
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Crude Oil Daily Chart
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