Oil prices rallied overnight as falling US inventories overshadowed a strong rise in active oil rigs. Brent moved closer to $50 per barrel while the West Texas Intermediate (WTI) rose to more than $46 for the first time in months.
In a report yesterday, the Energy Information Administration (EIA) said that inventories fell by more than 754k last week. In total, stocks rose to more than 488.7 million. Analysts polled by Reuters were expecting the data to show that inventories rose by more than 127k barrels. Earlier yesterday, data by the American Petroleum Institute (API) showed that inventory build-up had continued to climb.
In general, oil prices are rising because of the rising number of the optimism surrounding the Covid vaccine and potential extension of supply cuts by OPEC and its allies. A vaccine will boost crude oil price as things return to normal.
However, further data showed that US supplies could increase in the next few months. According to Baker Hughes, oil rig count increased by 10 to 241 in the previous week. The rigs have been on a steady increase after bottoming at 172 in August.
Brent Oil Prices Ripe For a Pullback as US Rigs Rise
Oil prices technical outlook
Looking at the four-hour chart, we see that Brent oil prices have been rising recently. In total, they have risen by more than 36% this month. They remain supported by the 25-day and 15-day weighted moving average while the RSI remains above the overbought level.
Therefore, with the price nearing the psychological level of $50 as I predicted yesterday, it is possible that we will see a pullback in the near term before rising again.
Crude oil price chart