Crude oil price declined in early trading as the market refocused on risks of oversupply in the market. The slight decline reversed course on a five-day rally that saw Brent prices move above $30 per barrel.
The previous rally was because the market was optimistic about the state of the world economy as more countries start to reopen. With this reopening, investors believed that it would spur growth in the near term. The rally was also because of the crude oil supply cuts by OPEC, its allies, and other producers like Norway. In the United States, a number of companies such as Diamondback and Chesapeake are going through bankruptcy protection.
However, a data released by the American Petroleum Institute (API) showed that inventories were continuing to build up. The inventories stood at more than 8 million barrels in the previous week, which was higher than what analysts were expecting. Later today, we will receive official data from the EIA, which is a part of the Energy Department.
The price also dropped in reaction to a statement by Diamondback Energy. The company said that it would consider going back to production if prices remained above $30. As such, investors are concerned that more wells will come online if prices continue rising.
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Brent crude oil price technical outlook
On the four-hour chart, the crude oil price found strong resistance at the 32 level. This price is along the 78.6% Fibonacci retracement level. As such, it seems like more buyers are being overwhelmed by the sellers. Still, the price is on a strong upward trend and there are chances that buyers will prevail. But, they need to move above the 78.2% retracement first. If this happens, they will then attempt to retest the important psychological resistance level at 34.00.
On the flip side, a move below the 28.50 will invalidate this price action because it will signal that there were sellers in the market. This price is at the important 61.8% retracement level.