The WTI crude oil price was 2.4% higher on the day and is heading for a test of key resistance at the $44.00 level. Crude was trading at $42.50 in the European session, but was a dollar higher as the U.S. stock market session got under way.
West Texas Intermediate (WTI) prices were trading higher after hurricane Laura was upgraded from a tropical storm to a category 1 hurricane. Forecasters also stated that Laura could become a major category 3 hurricane by late Wednesday or early Thursday.
The Gulf of Mexico and Louisiana were facing a double threat with tropical storm Marco, however that significantly weakened before making landfall on Monday night. Despite the downgrade, the storm had already hit the oil industry with workers evacuated from oil rigs in the gulf and over 50% of production shut down in the region. Mandatory evacuations have already begun for citizens in the states of Louisiana and Texas. One of the areas being evacuated is Port Arthur, Texas which is home to the country’s largest oil refinery.
The production shutdown is sure to affect inventories going forward and we will have the API release later today, followed by the EIA release Wednesday. Oil stocks have been falling steadily since the oil glut seen after the Coronavirus shutdowns cut oil demand globally by around 30%. If the latest figures show a larger inventory draw than expected, we could see a further push higher in WTI crude oil prices. Traders will also continue to watch hurricane Laura as it begins to make landfall.
WTI Crude Oil Technical Outlook
WTI crude oil prices have been finding support in a bullish flag pattern and the latest rally is looking to test a double resistance level, which combines the higher end of the flag and a horizontal resistance level that provided support before the mid-March plunge.
If crude can get above this level then the price could run higher by squeezing short positions. If the price of WTI dips back below $43.00 then caution would be advised for long positions.