The crude oil price is higher in the Asian session as lower inventories and renewed demand optimism offset a stronger US Dollar.
Front-month WTi futures trading on Nymex, are higher by $0.76 to $66.46. The oil market is looking past an upcoming production increase at OPEC, choosing to instead fiocus on economic re-openings in Europe,for trading cues.
Given the stronger US Dollar, after a hawkish statement from Fed Chair turned Treasury Secretary Janet Yellen, the pressure was on for the American Petroleum Institute to deliver on the weekly Crude oil inventory data to save steep losses in the crude oil price. And deliver it did, reporting a much larger-than-expected drawdown in inventories of 7.688 million barrels.
Yellen sent shockwaves through risk assets earlier in the day, stating:
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,”.
Whilst the Treasury head was quick to walk back that statement later in the day. It did little to improve the risk-off sentiment that rattled the broader market.
The crude oil price is now trading at levels not seen since March 15th and technically may have more room to go. A move above the March 9th high of $67.98 clears the path for the crude oil price to re-visit pre covid levels.
Crude Oil Price Technical Outlook
Whilst the recent extension is looking a little stretched on the short-dated charts. The daily chart points to a growing likelihood of a run at the October 2020 high of $76.90 and an increase of +15.50% from here.
However, traders should keep a close eye on signs of a reversal in the US Dollar Index. The heavily shorted Greenback has been on a one-way ticket lower for the last 6 weeks as the world embraces the reflation trade. Any sharp snap-back for the Dollar may be enough to put a lid on Crude prices.
Failing that, we expect momentum buying through $68.00 to push the Crude oil Price to fresh 2021 highs.
An ascending trend line at $6240 (in place from the November $33.32 low) offers support. Closely followed by the 50-Day Moving average at $62.40. A break of these support levels would negate the immediately bullish outlook.