Crude Oil Prices Remain Bullish
The price of U.S. crude oil (West Texas Intermediate) remained buoyant and bullish on Thursday, keeping its sharp rebound and recovery from late-December well intact. The recent strength in crude oil prices has been supported by a few different factors.
Crude Oil Supported by Falling U.S. Supply, OPEC Production Cuts
On Wednesday, the U.S. Energy Information Administration (EIA) reported that U.S. crude oil supplies unexpectedly dropped by 8.6 million barrels last week against expectations for a rise of 2.8 million barrels. This prompted a substantial boost for crude prices, which pared losses from earlier in the week when President Trump tweeted at OPEC to “relax” on oil production cuts, as “oil prices getting too high.” Saudi Energy Minister Khalid al-Falih responded on Wednesday, making it apparent that OPEC would continue with its production cuts to stabilize and boost prices.
Crude Oil Technicals
From a technical perspective, the late December trough bottomed at a key support level around $42.25 per barrel, which matches the lows in June 2017 and November 2016. Since December, the price of crude oil has gone on to breakout above its 50-day moving average and then form an inverted head-and-shoulders – a bullish reversal pattern.
What May Happen Next?
The greatest risk to a continued recovery in crude oil prices is a potential slowing of global economic growth, especially in China, which would weigh on crude oil demand. Tied closely to this are the current and future trade negotiations between the U.S. and China. Any successful deal agreement in March will likely help boost crude oil further. But any failure to reach an agreement could exacerbate China’s dimming growth prospects and weigh on crude prices.
A price move back up around the $61 level would be the minimum needed to put U.S. crude oil back into its previous bullish trend.
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Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart