Oil market on the rise

Crude Oil’s price was among the biggest commodity winners in the past days as it intensified its ascendance higher. During the first 3 days of February, WTI moved higher consecutively in all daily sessions and is now trading nearby $56 per barrel, which is more than a year high. This report aims to detail some of the most relevant matters surrounding the Oil market at the moment, while our technical analysis at the end will add to a more complete examination of the price activity.

According to the weekly Oil market data released in the previous days, interesting information has come up that could help traders make decisions accurately. In the past week, the Baker Hughes Oil rig count was released on Friday, once again confirming the steady increase of rig openings in the US. The latest increase in the past week was from 289 to 295 active Oil rigs. We have confirmation of a rise in active Oil rigs in the US, yet the rise continues to be rather small but consistent in the past months, averaging 6 active Oil rigs per week, since October 2020.

On Tuesday the 2nd we got the weekly US API Crude Oil stocks figure, which indicated a large drawdown of -4.3M barrels. Even though the drawdown is considerable, it did not reach analyst expectations of the larger -5.3M barrel drawdown. The market had already priced in the reaction, as WTI surged to $55, hours before the release, so we could say the drawdown was expected. On Wednesday the 3rd we got the EIA weekly Oil market stockpiles with a drawdown of -1M barrels. However, it would be good to emphasize the significant drawdown seen in the last week of January, when a -9.9M barrels drawdown was displayed. The largest drawdown before that figure was back in late July 2020 thus the figure is very notable. All the pre mentioned readings in our opinion tend to support Oil prices. Our view is that Oil demand seems to be increasing steadily while stocks piles are kept on the low.

In the past days, the OPEC+ team kept its oil output policy steady. In our opinion the group’s decision could be a sign of further defense during the current difficult times of the pandemic. This is also an attempt to keep supply in control with steady production cuts as an uncertain outlook over the global economy’s performance is looming. However, our view is that the Oil market could possibly operate with a chip on its shoulder in the coming months, but the ongoing vaccination process seems to counter the circumstances, possibly supporting the Oil industry in the medium term.

تجزیه و تحلیل فنی

WTI h4 chart

We start first noting the upward trend of the commodity’s price continuing, after a minor stabilization in the last days of January. A breach and a hold above $55 is a bullish sign for us as WTI is now trading at levels seen prior to the pandemic outbreak. If the upward momentum continues the possible stops that could be made are at the (R1) 56.50, the (R2) 58.00 and the (R3) 60.00 levels. In case a selling trend occurs, then the first stop could possibly be at the (S1) 54.85 support level and a breach lower could even send WTI to the (S2) 53.50. Finally our (S3) 51.50 remains a strong support level and has been noted for some time now. The RSI indicator below our chart is currently above 70 displaying further the buying interest by traders at the moment.

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