US crude oil price extended its previous gains on Thursday as it recovers from the 11-week low hit at the start of the week. At the time of writing, WTI futures were trading at $63.46 while Brent was at $67.59.
Better-than-expected US oil inventory figures have improved the market sentiment even as concerns over the US economic health persist. The market is also eyeing the potential peace deal between Russia and Ukraine. A positive outcome from the highly anticipated Zelensky-Putin talks may ease the Russian oil sanctions; tilting the global market towards a surplus.
Bullish market sentiment fuels WTI crude oil price recovery
About a week ago, data released by the US Commerce Department indicated that retail sales in the country rose by 0.5% with June’s figures being revised upwards. The figures highlighted consumer resilience, even as the financial market remains cautious of the US economic health.
Indeed, the US consumer sentiment unexpectedly dropped in early August as the labor market slows.
Fast forward to this week’s EIA’s weekly inventory data and the script is similar. Crude oil stockpiles dropped by 6 million barrels in the week that ended on 15th August. This is in comparison to the expected decline of 1.8 million barrels. These figures pointed to robust oil demand, an aspect that helped bolster the market sentiment.
However, the rise in crude oil inventories at the Cushing delivery hub shows that oil demand in the leading consumer country might actually be softening. From this perspective, the recorded draw in stockpiles are likely as a result of higher exports and steady refinery runs.
In addition to the market sentiment, the crude oil market is also reacting to the potential Russia-Ukraine talks. President Trump stated that he is arranging for a meeting between the two European countries.
The increasing odds of a peace deal places the crude oil market under pressure. Such an agreement will likely ease the Russian sanctions; tilting the global market towards a surplus. As it is, Russia is operating at near capacity.
US oil price technical analysis
WTI oil price held above the support level of $62.50 on Thursday as it recovers from the two-and-a-half-month low hit at the start of the week. As the bulls strive to attract more buyers, the path to recovery is not without hurdles.
A look at its daily price chart shows the formation of the bearish death cross pattern that has been in place for over a week. This is after the short-term 25-day EMA crossed the medium-term 50-day EMA to the downside.
In the immediate term, the range between $62.50 and $64 is worth watching. Further rebounding will likely cap the gains along the 50-day MA at $65. On the lower side, I expect $61.50 to remain a steady support zone for WTI crude oil, at least in the short term.
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