Crude oil prices traded higher yesterday after bottoming out at $60.28 during the Asian session. It reached a peak of $61.45 before it settled at $60.82 with a 32-cent profit.
Crude Oil Inventories Fell Last Week
Yesterday, the Energy Information Administration (EIA) reported that there was a shortage of 1.1 million barrels of oil in commercial storage. This number was actually less than what markets had anticipated. The forecast was for a deficit of 1.5 million barrels for the week ending on December 13. A lower-than-expected number is typically bullish for crude oil prices because lower supply suggests that the US may soon increase its demand for the commodity.
It would seem that despite government data failed to meet expectations, market participants were relieved to see that there was no surplus. Remember that the American Petroleum Institute (API) reported a surplus of 4.7 million barrels of oil earlier this week.
Market Sentiment to Dictate Direction?
For today, there are no oil-related reports due for release. This means that crude oil prices will likely take their cue from market sentiment. Last week’s news on the US-China phase one deal helped the commodity trade to its 3-month highs. It does not seem to be bothered by no-deal Brexit concerns for now. However, if risk aversion dominates market sentiment, we could see crude oil prices fall.
On the hourly time frame, we can see that crude oil prices have been on an uptrend. This is evidenced by the higher highs and higher lows that the commodity has been making. In fact, when you connect the recent lows, a rising trend line becomes apparent. Crude oil prices may test support at this trend line which coincides nicely with the 50% Fib level (when you draw from yesterday’s low to yesterday’s high). If support at $60.70 does not hold, crude oil prices may re-test yesterday’s low and the 100 SMA at $60.20.
Conversely, there could be enough buyers in today’s trading that we may not even see a deeper pullback to the trend line. As of this writing, crude oil prices are testing the 38.2% Fib level. A strong bullish candle here could mean that the commodity may trade above the $61.00 handle again soon.