Data from the Energy Information Administration (EIA) indicates that crude oil stocks in the US fell by 3.5million barrels in the week ended April 2, 2021. This was a much-larger than expected drop, as the markets were only expecting crude oil inventories to drop by 2 million barrels. The previous week saw a 900,000 barrel shortfall.
The API’s version of the same report which was released yesterday showed a surprise build-up in gasoline and distillate inventories. The drop in the crude oil inventories did very little to stop the bearish sentiment on the Brent crude benchmark, which remains lower on the day.
Crude oil prices have had a bearish tone since the OPEC+ alliance voted to start tapering the production curbs implemented last year as from May. Following Monday’s huge drop, the Brent crude benchmark recovered somewhat on Tuesday, but prices are decidedly bearish once more with Brent crude losing 1.44% on the day.
Technical Outlook for Crude Oil Price (Brent)
The price picture on the daily chart shows that recent price action has condensed into an unconventional bearish flag pattern, with the daily candle now challenging the lower border of the flag.
The typical resolution of a flag is for price to break in the direction of the pole, which in this case is the bearish candle of 18 March. A breakdown of the flag also takes out the 62.21 support level, which opens the door for bears to target the 60.07 support. Below this level, 57.47 awaits bears if there is a further price decline.
On the other hand, a bounce on the flag’s lower border allows crude oil price to recover towards the 65.95 resistance which lies at the flag’s upper border, with 64.26 serving as a barrier that must be overcome in the process. If the price breaks above the flag, we could see a run towards 66.81 and potentially 67.74, which negates the bearish flag’s expected resolution.