After several days of oscillating within a tight range, crude oil price finally burst through the $55 mark as a larger-than-expected drawdown in crude oil inventories was announced by the Energy Information Administration (EIA).
Crude oil inventories fell by 1.699 million barrels, against an expected stock increase of 2.2million barrels. This has pushed up the WTI blend of crude to $55.10 as at the time of writing, with more upside being expected.
The crude oil inventories drawdown is coming on the back of Tuesday’s announcement by OPEC that it would hold meetings to discuss further production cuts in December. Sources close to the situation report that the meeting is being convened between OPEC and its allies to find ways to shore up prices after recent monthly reports from the International Energy Agency (IEA) have sequentially lowered global demand forecasts for crude oil.
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Technical Outlook for WTI Crude
Crude oil price is starting to push against the upper border of the rising channel after the crude oil inventories report showed a drawdown in crude oil reserves in the US. Crude oil price has already pushed above the 54.20 resistance which formed a ceiling to last week’s range bound price moves. The 54.20 price level (neckline of June 2019 double bottom) is now expected to function in role reversal as a horizontal support level.
55.73 (previous lows of February and July 22-26) and 56.65 (38.2% Fibonacci level of trace from April 23 swing high to August 7 swing low) are expected to the next areas of resistance. Continuation of the bullish price momentum of the last two days could take price to these areas. A move to 58.50 cannot be ruled out if such momentum remains strong. However, there are several market fundamentals that will pose strong headwinds to such strong upside moves and these may start to play a factor pretty quickly.
On the flip side, it is possible that the WTI-positive EIA report may only provide enough upside recovery to initiate renewed rally sell orders, which could beat a pathway to further downside that would challenge 52.28 once more (recent support of last two weeks). A break below this area brings the double bottoms of June 2019 and August 7 low of 50.52 into focus.