Crude Oil Forecast: EIA Report in Focus as Prices Tackle Confluent Resistance

2021-08-25 02:00:00

Thomas Westwater,

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Crude Oil, Inventory, Market Sentiment, Covid – Talking Points
Crude Oil Technical Forecast
Crude Oil Daily Chart
Crude Oil TRADING RESOURCES

Crude Oil, Inventory, Market Sentiment, Covid – Talking Points

Crude and Brent oil rebounds alongside market sentiment
Energy traders prepare for the US EIA inventory report
Crude oil prices rise but run into confluent resistance

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A broad rebound in sentiment, fueled by ebbing fears over rising Covid cases, lifted energy prices overnight, including crude and Brent oil benchmarks. Prices appear to be taking a breather during Wednesday’s Asia Pacific trading session, but last week’s losses are nearly reversed. The American Petroleum Institute (API) disappointed analysts’ expectations earlier, leaving prices susceptible to broader risk trends.

The upbeat sentiment that allowed prices to rebound is still susceptible to the same causes--Covid and resulting lockdowns--that dented optimism last week. Energy traders, along with equity and bond investors, will likely keep watch over deteriorating developments. Ones that could force government policymakers to increase restrictions are of a particular focus.

That said, Asia Pacific traders saw several shots come across the bow this morning. This morning, the Australian state of New South Wales (NSW) reported 919 new locally-sourced Covid cases in the 24 hours until 8 pm local time. That is up from 753 over the prior 24-hour period. Hospitalizations also increased, rising to 645 from 608. 40 people are on ventilators, up from 34.

Meanwhile, New Zealand reported 62 new locally sourced cases. These numbers bode poorly for the Trans-Tasman economies. If the worrisome trends continue, it will more than likely lead to further lockdown extensions. This could be a potential catalyst for another risk-off move that could drag oil prices.

Crude and Brent traders will turn their eyes to tomorrow’s oil stocks report. The US Energy Information Administration (EIA) will release its weekly Petroleum Status Report, which includes inventory levels for crude oil and other fuel products. Analysts expect crude oil stocks to decline by 2.3 million barrels for the week ending August 20, according to a Bloomberg survey. A better-than-expected figure may see oil resume its upward movement, but the API figures provided a bearish preface to consider until then.

Crude Oil Technical Forecast

Prices pinged the 100-day Simple Moving Average (SMA) overnight, which coincides with a trendline that provided support up until last week. That area appears to be serving as confluent resistance. The MACD oscillator is nearing a bullish signal, with the signal line awaiting a crossover from the MACD line. A break above the upside obstructions may see prices aim for the psychologically imposing 70 level. Alternatively, a drop lower may see bears take the steering wheel again in the short term.