News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Oil Price Rebound Underpinned by Decline in US Crude Inventories

Oil Price Rebound Underpinned by Decline in US Crude Inventories

David Song, Strategist

Oil Price Talking Points

The price of oil defends the advance from the monthly low ($65.01) amid a larger-than-expected decline in US inventories, and crude may continue to retrace the decline from the yearly high ($76.98) as it trades back above the 50-Day SMA ($70.55).

Advertisement

Oil Price Rebound Underpinned by Decline in US Crude Inventories

The price of oil trades near the weekly high ($72.60) as US inventories contract 4.089M in the week ending July 23 versus forecasts for a 2.928M decline, and crude may continue to exhibit the bullish trend from earlier this year even as theOrganization of Petroleum Exporting Countries (OPEC) agree to boost production “by 0.4 mb/d on a monthly basis starting August 2021.

Image of DailyFX economic calendar for US

The development suggests the 2.108M rise in the week ending July 16 may have been a one off event as demand is expected to improve throughout the second half of the year, and the data prints may keep OPEC and its allies on a preset course as US production remains stagnant.

Image of EIA Weekly US Field Production of Crude Oil

A deeper look at the figures from the Energy Information Administration (EIA) showed weekly field production narrowing to 11,200K from 11,400K in the week ending July 16, and the subdued recovery in US output may help to keep the price of oil afloat as OPEC’s most recent Monthly Oil Market Report (MOMR) emphasizes that “world oil demand growth in 2021 is forecast at 6.0 mb/d, unchanged from last month’s assessment.”

With that said, the price of oil may continue to exhibit the bullish trend from earlier this year as indications of stronger demand are met with limited supply, and crude may continue to retrace the decline from the yearly high ($76.98) as it trades back above the 50-Day SMA ($70.55).

Oil Price Daily Chart

Image of Oil price daily chart

Source: Trading View

  • Keep in mind, crude broke out of the range bound price action from the third quarter of 2020 as it established an upward trending channel, with the price of oil taking out the 2019 high ($66.60) as both the 50-Day SMA ($70.55) and 200-Day SMA ($57.72)established a positive slope.
  • The price of oil may continue to exhibit a bullish trend as the rally from earlier this year removes the threat of a double-top formation, but lack of momentum to test the 2018 high ($76.90) pushed crude below the 50-Day SMA ($70.55), with the Relative Strength Index (RSI) establishing a downward trend after flashing a textbook sell signal earlier this month.
  • Nevertheless, lack of momentum to close below the $65.40 (23.6% expansion) region has pushed the price of oil back above the 50-Day SMA ($70.55), but need a break/close above the $74.40 (50% expansion) zone to open up the $76.90 (50% retracement) area, which largely lines up with the July high ($76.98).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES