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Oil price advanced after the EIA report showed a sharp drop in crude inventories

Oil price advanced after the EIA report showed a sharp drop in crude inventories

The price of crude oil has advanced above $41.5 this trading week and the current price stands around $40.9. Oil has stabilized above $40 after the EIA report showed a sharp drop in crude inventories due to the closure of offshore production.

Fundamental analysis: There is still no clear trend for oil price

Crude oil remains above the $40 psychological level despite the fact that OPEC announced that global oil demand will return to pre-pandemic levels in 2022. Hurricane Delta shut down most production in the Gulf of Mexico and EIA report showed a sharp drop in crude inventories.

The EIA predicts that global oil demand will be 93.1 million b/d in 2020 which is down 8.3 million b/d from 2019. It expects demand to increase by 6.5 million b/d in 2021 and the price will also rise.

According to the news, Turkey has raised the estimated reserves in a gas field off its Black Sea coast to 405 billion cubic meters after finding an additional 85 billion cubic meters. Crude oil has weakened on Thursday to $39.66 pressured by growing fears that new restrictive measures could significantly reduce demand for oil.

The coronavirus crisis has already reduced global oil demand and OPEC made a decision to limit production until December. Demand for oil has also weakened as air travel remains restricted and according to some reports the global flights were down by 26% from year-prior levels.

COVID-19 cases in the US continue to rise while Europe is not faring any better with this pandemic. This is certainly not good for the economy and prices of crude oil will be connected with the global economic outlook.

There is still no clear trend for oil price but analysts stay “bullish” on oil and most of them are expecting an increase in oil prices for the next several months (a slow but steady rising of prices).

Technical analysis: The price of crude oil has stabilized above $40

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $40 and $35, $45 and  $50 represent the resistance levels.

If the price jumps above $45 it would be a signal to buy oil and we have the open way to $50. Rising above $50 supports the continuation of the bullish trend and the next price target could be located around $55.

On the other side, if the price falls below $40 it would be a “sell” signal and we have the open way to $35.

Summary

The price of crude oil has advanced this trading week after the EIA report showed a sharp drop in crude inventories. There is still no clear trend for oil prices but analysts stay “bullish” on oil and most of them are expecting an increase in oil prices for the next several months. In the mid term, prices of crude oil will be connected with the global economic recovery and worries over the oil demand.

The post Oil price advanced after the EIA report showed a sharp drop in crude inventories appeared first on Invezz.

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