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Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

Margaret Yang, CFA, Strategist

CRUDE OIL OUTLOOK:

  • WTI crude oil climbed 2.6% to US$ 38.77 as API reported a surprising fall in crude stockpiles
  • Russia and OPEC+ are in talks to delay a production hike as demand weakens
  • US and Canada oil rig counts continued to climb, according to Baker Hughes
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WTI crude oil prices edged up higher on US presidential election day as the American Petroleum Institute (API) reported a 8.01-million-barrel draw from crude inventoryfor the week ending October 30th. This contracted forecasts calling for a 0.89 million rise. Oil prices were also buoyed by a potential delay in production hikes among OPEC+ members as Russia and Saudi Arabia lead talks about plans to rein output.

Crude oil prices reboundedto US$ 38.77 from a five-month low of US$ 34.60 seen earlier this week. Meanwhile, traders are waiting for results of the US presidential election, which may have some impact on oil prices. A Democratic sweep outcome may favor green energy over fossil fuels, whereas a Trump-win scenario may support oil prices to some extent.

The EIA DOE crude oil inventory report is due to be released later today. Analysts foresee an 0.89-million-barrel build in stockpiles. The historic negative correlation between crude oil prices and DOE inventory changes can be viewed in the chart below. A much larger-than-expected rise in stockpiles may weigh on oil prices, whereas a larger draw may result in the opposite.

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

Source: DailyFX

In the near term, supply may continue to outpace demand as a second viral wave sweeps most parts of the EU and the US. More than 6 million new Covid-19 cases were reported worldwide in the last 14 days, marking a record high. More stringent lockdown measures introduced in several European countries may have a significant impact on global energy demand in the winter.

New Covid-19 cases globally

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

Source: Google

This week’s Baker Hughes report showed that the total number of active oil rigs in North America is still rising (table below), which may point to higher upstream supplies. The number of oil rigs in the United States increased by 9 to 296, while Canada’s rig count rose by 3 to 86 in the week ending October 30th.

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

Source: Baker Hughes

Technically,WTI crude oil prices climbed for a third day after hitting a five-month low of US$ 34.6 earlier this week. Upward momentum appears to be strong as the MACD indicator is about to form a “Golden Cross”. An immediate resistance level can be found at US$ 39.20, where the 20-Day and 50-Day Simple Moving Average (SMA) lines overlap. An immediate support level could be found at US$ 36.4 – the 23.6% Fibonacci retracement.

WTI Crude Oil PriceDaily Chart

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

IG Client Sentiment shows that 57% of retail traders are net-long oil, versus 43% that are net-short (chart below). Compared to a day ago, retail traders have trimmed both long (-14%) and short (-5%) positions. Compared to a week ago, the number of traders long has decreased by 13% while the short side has increased by 9%.

Crude Oil Prices Rise on Falling Stockpiles, OPEC+ May Rein Output

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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

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