The US crude oil inventories dropped more than expected, according to the latest weekly report by the Energy Information Administration (EIA). US crude oil inventories fell by approximately 2.5million barrels last week, which was an unexpected drop after analysts had predicted a rise of 400,000 barrels.
Furthermore, the Organization of Petroleum Exporting Countries (OPEC) has raised the global crude oil demand outlook by 0.14 million barrels per day to 1.22 million barrels per day in its latest market report. It also raised the non-OPEC crude oil supply growth forecast for 2020 to 2.35 million barrels per day.
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Technical Outlook for Brent Crude
Brent crude is trading lower as a result of the news and has pushed below the lower channel border on the daily chart. However, this may be a case of stop hunting by institutional traders as the US crude oil inventories numbers and the OPEC outlook are supposed to be bullish for crude oil.
Despite pushing below the channel’s trendline, Brent crude is testing support at 63.71. If the news is able to kick in and drive traders in the expected direction, this could trigger a bounce at this price level, which then pushes Brent crude into the channel once more and towards the channel’s return line. It is a move that is expected to test 66.98, and success of the price move to the upper channel border would have to break above this level.
On the flip side, if traders continue to selloff Brent crude and push it below 63.71 with a 3% downside penetration, we may see further bearishness towards 60.66, with further support provided at 57.47.
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