Oil prices are under pressure as concerns about the US production and inventories rise. The price of Brent is trading at $48.93 while that of the West Texas Intermediate (WTI) is at $45.60. This means that the price of Brent is finding it difficult to move above $50.
There are some positive signs about oil prices. For one, countries like the United Kingdom have started issuing Covid vaccinations. Others like the United States and Canada are in the final stages of delivering the shots. Another positive is that OPEC leaders recently decided to gradually increase production starting in January.
However, the biggest concern is about the US, where producers have started to increase their amount of production. Data by Baker Hughes showed that the number of active rigs are increasing.
Meanwhile, in a report yesterday, the Energy Information Administration (EIA) said that US oil inventories rose by more than 15.9 million barrels last week. That was higher than the drawdown of more than 1.5 million barrels that analysts were expecting.
Oil prices technical outlook
On the four-hour chart, the price of Brent oil prices is in a tight range. It is slightly below this year’s high of $49.82 and the psychological level of $50.0. As a result, the average true range (ATR) has dropped to the lowest level since October 28, in a sign of low volatility.
This could be the calm before the storm. As I have written before, I believe that the price will ultimately rise to $50 and possibly to $60 in the next few weeks.
Brent technical chart