Crude oil prices rose for a fifth straight day on Wednesday, hitting $75 a barrel to attain its highest levels in 2 years. The increase in crude oil prices is due to a recovery-driven demand, as well as a sharp drop in U.S. crude oil inventories.
The Energy Information Administration reported a sharp decline in U.S. crude oil stocks. Crude oil inventories fell by 7.4 million barrels in the week ended June 11, as U.S. refineries reported increased capacity utilization due to a spike in gasoline demand. The figure dwarfed the estimate of a 2.1million barrel shortfall and was also higher than the previous week’s inventory shortfall of 5.2million barrels.
On Tuesday, the American Petroleum Institute also reported a drop in its assessment of U.S. crude inventories.
Ahead of the U.S. independence day holiday weekend, gasoline demand has risen sharply, causing refineries in the U.S. to consume more than 420,000 barrels of crude oil more than the previous week. Economies recovering from the COVID-related shutdowns are also contributing to the heavier demand driving up crude oil prices.
Technical Levels to Watch
Brent crude is on the cusp of touching off the 2-year high at 75.52. This resistance mark would be the price to beat for bulls. Above this level, the 29 October 2018 high at 78.00 becomes the new target, taking Brent crude to 30-month highs if achieved.
On the flip side, a rejection at the channel’s upper border or the 75.52 resistance could allow for a pullback, targeting 73.34 initially. If this level fails to hold back the correction, we could see a further decline towards 71.44 and 70.00, in that order.