Crude oil price has bounced off Wednesday’s low as the forces of demand and supply continue to heighten volatility in the market.
On Wednesday, crude oil price extended its losses after the Organization of Petroleum Exporting Countries and its allies (OPEC+) held on to its decision to increase output in the ensuing months. The alliance intends to continue with its pace of pumping in 400,000 bpd each month.
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In a statement OPEC+ stated, “While the effects of the COVID-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates.”
OPEC+ decision to increase production comes amid the ongoing demand concerns. On the one hand, this week’s US oil inventory data alleviated the concerns. According to the Energy Information Administration (EIA), the amount of crude oil in storage dropped by 7.169 million barrels for the week ending on 27th August. The figure beat the experts’ estimates of -3.088 million and the prior week’s -2.979 million.
However, gasoline inventories were up by 1.290 million barrels compared to the previous week’s draw of 2.242 million. Analysts had forecasted a reading of -1.633 million barrels. With the summer travel season coming to an end on Labor Day on 6th September, investors remain cautiously optimistic about the status of oil demand.
The aggressive spreading of the Delta coronavirus variant continues to impact air travel, an aspect that is weighing on crude oil price. On Tuesday, the US Transportation Security Administration (TSA) screened 1.345 million passengers. The figure was the lowest since 11th May. Besides, it represents a 33% decline from the same period prior to the coronavirus pandemic in 2019.
Brent oil technical outlook
Crude oil price for the third consecutive day. At the time of writing, the benchmark for global oil – Brent futures – was down by 0.01% at 71.27. Since the beginning of the week, it has dropped by about 3%. On a two-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages.
In the near term, Brent oil will likely hover below the 25-day EMA at 71.68. A move higher will place the resistance level at 72.50. On the flip side, crude oil price is likely to continue finding support at the psychological level of 70. Below that level, this thesis will be invalid.
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