What Next for Crude Oil Price as US Rig Count Rise?
Crude oil price is wavering today as traders watch out the recent developments in the oil market and the overall weaker US dollar. Brent, the international benchmark, is up by just 0.10% while the West Texas Intermediate (WTI) has fallen by about 0.15%. The two are trading at $49.10 and $46.00, respectively.
Oil traders are still assessing the impact of last week’s OPEC+ meeting in which the members agreed to lift production by about 500,000 barrels in the coming month. That was a compromise between a group led by Russia and Saudi Arabia and another one led by United Arab Emirates. The two sides believe that the modest increase will not have a major impact on oil prices as demand rises.
However, the biggest challenge for crude oil prices is that US producers have started ramping-up production. This is evidenced by the latest oil rig data by Baker Hughes. In their Friday report, the company said that the rigs rose by 5 last week to 246. This is substantially higher than the year-to-date low of about 170.
Still, the main catalyst for crude oil price is the potential demand pick-up as countries start Covid-19 vaccinations. This will ultimately lead to more travelling, which will in turn hike international demand.
Crude oil price technical outlook
Turning to the four-hour chart, we see that Brent is trading at $49.10, which is slightly below last week’s high of $49.82. The chart also shows that the price broke-out above the descending channel shown in yellow. It is also along the ascending trendline that is shown in pink and above the 15-period and 25-period weighted moving averages.
Therefore, at this point, the short-term outlook for the price is neutral. If it moves below the ascending pink trendline, it will increase the possibility of the price breaking-out lower. However, like I have written before, the price will possibly rise to $50 and possibly $60 in the next few weeks.