WTI’s price ended lower in the past week after a brief reach over $67 per barrel. In the current week we are observing some weakening for the commodity’s price, but at the same time some stabilization may have prevailed. In this report we will be analyzing information currently influencing the Oil market, while our technical analysis at the end will be looking into the price action in more detail. Our aim is to keep this report simple but informative in order to help traders make the best decisions.
We make a start with the Oil market’s economic data, as we attempt to make valuable distinctions in process. In the past days the EIA released its weekly crude Oil inventory figure indicating a surplus of 2.4M barrels. Due to the fact that the forecast was a little bit higher, traders may have not been impressed upon release inviting the bears. When the number came out, WTI dropped approximately $0.50 within the next minutes, a sign of bearish tendencies. On Tuesday the 16th we also received the weekly API crude Oil inventory figure with a drawdown -1M barrels.
This came out contrary to expectations of a buildup, thus the bulls seized the moment and WTI’s price gained $0.30 upon release as the news were a great surprise for traders. During the past week we also received the Baker Hughes Oil rig count which displayed a minor drop from 310 to 309 active Oil rigs. Despite the minor decrease in active Oil rigs, this could be an indication of demand for WTI weakening. We must note this is the second drop in active oil rigs on a weekly basis since the start of the year.
However, as active Oil rigs remain above the figure of 300, WTI’s price could be stable higher in our opinion.Looking at the fundamentals, we must note that a couple of weeks back the OPEC+ group extended its supply cuts until April. The happening suggests that the group is making further efforts to properly stabilize supply and demand keeping in mind the pandemic and its impact on the economy. It must be emphasized that Saudi Arabia also rolled over its 1M barrel extra cut. The happening contributed to the latest rally seen in WTI’s price almost reaching $70 per barrel.
In the past days a report by the IEA wrote that Oil demand will return to 2019 levels by 2023. Despite this prediction, we must note that during the beginning of the current year, global oil demand was higher than expected due to colder weather and improved industrial activity in the US and elsewhere. In our view, as the economic recovery and vaccination processes continues to be rolled out, the demand for Oil could increase with more people being able to return to work or travel.
Finally, an opinion contradicting the pre mentioned but rather important, as a possible scenario is that the Oil market remains in uncertainty as the outcome of the vaccination process is unknown. In Europe the vaccination program is still stalling with countries declining Astrazeneca’s shot for use. If Oil demand weakens or is not stable upwards then supply may even surpass the required levels in the medium term putting negative pressure on Oil prices.
Technically, WTI has been moving in a sideways motion between our (R1) 65.50 resistance level and our (S1) 63.50 support barrier. Yet, during this period the commodity has made consecutive drops lower thus we tend to keep a sideways motion with bearish tendencies in focus. Our levels to the downside are the (S1) 63.50 support barrier that was tested during the 10th of March but not clearly breached. Lower we have placed our (S2) 62.50 level were in our opinion WTI could make a brief stop before dropping to the (S3) 61.00 hurdle as a result of a possible continuous selling trend. In the opposite direction, as noted we have set resistance at the (R1) 65.50 level.
A move even higher could send WTI to test the (R2) 66.50 resistance line as was the case on the 15th of March. Yet, the highest level of our chart is the (R3) 67.50 barrier which was the highest level reached during March 2021 but also since October 2018. The RSI indicator below our chart has been moving between the 70 and 30 level for most of March probably indicating ambiguity among traders over the future price action of the commodity.