US WTI Crude Oil Up 4th Day In A Row As China Steers Away From COVID, U.S. Fuel Demand Rises
- US WTI Crude Oil Futures extended the bullish trajectory on Thursday, buoyed by a record drop in crude inventories
- China steers away from its strict Zero COVID-19 policy
- U.S. Energy Information Administration (EIA) on Wednesday reported a huge drawdown in Crude Inventories, which in turn offered support to Crude Oil Prices
US WTI Crude Oil Futures prolonged the strong move-up witnessed since late last week and gained positive traction for the fourth day on Thursday as top oil importer China continued to relax safeguards on the COVID-19 front. At the same time, data showed fuel demand rose in the United States last week from higher public travel and trucker activity to deliver packages for the year-end holidays.
As of 03:45 (UTC +3), U.S. West Texas Intermediate (WTI) crude oil was up 0.39% to trade at $79.73 per barrel, while its counterpart Brent Crude oil was up 0.32% to trade at $82.45 per barrel.
The Chinese government is encouraging people to continue going to work even if they are infected with the coronavirus as it shifts away from its previous policy of trying to eliminate COVID-19. Previously, individuals with the virus were placed in government quarantine for an indefinite period of time, and entire residential buildings were sometimes locked down to prevent the spread of the disease. China's method of counting COVID-19 deaths, which only includes those who die from respiratory illnesses such as pneumonia, has been met with skepticism and goes against World Health Organization guidelines, leading to lower reported death tolls compared to other countries. Despite these concerns, China's official version of events and its efforts to restart the economy has boosted crude oil prices.
Different uplifting crude oil prices was the crude oil inventories data by the Energy Information Administration (EIA), which showed U.S. crude inventories fell by 5.89 million barrels, compared with estimates for a drop of 1.66 million barrels. Market sources said that data from the American Petroleum Institute on Tuesday also showed a 3.1 million barrel draw in the week to Dec 16.
"This report is very bullish, especially with the fact that there's a draw from the crude oil equation and distillate inventories stopped their streak of builds ahead of the cold blast," said Phil Flynn, an analyst at Price Futures Group.
According to EIA data, distillate inventories fell by 242,000 barrels, compared with analyst estimates for a build of 336,000 barrels.
China's crude oil imports from Russia in November rose 17% year on year as Chinese refiners rushed to secure more cargoes ahead of a price cap imposed by the Group of Seven nations and an E.U. embargo from Dec 5.
Meanwhile, on Tuesday, Saudi Arabia's energy minister said on Tuesday that the heavily criticized move by OPEC+ to cut oil output was the right decision. The comments suggest that OPEC+ may continue to keep supply tight, said CMC Markets analyst Tina Teng.
As we advance, potentially limiting high oil prices are fears that the monetary tightening by a series of central banks will severely hit economic growth in the new year, curbing the demand for Crude.
Additionally, issues surrounding supply are likely to persist into the new year, with OPEC cutting its forecasts for U.S. shale oil supply, saying it's unlikely U.S. producers will be able to make up any gaps in output by the producer group.
Furthermore, vast parts of the United States are forecast to face heavy snow that is likely to cause flight delays and impassable roads during one of the year's busiest travel periods.
Technical Outlook: Four-Hours US WTI Crude Oil Price Chart
From a technical perspective, using a four-hour price chart, spot prices are now looking to extend the momentum further beyond the downward-sloping trendline of the descending channel pattern extending from the November 2022 swing high. The previous day's early Tokyo session's strong move beyond the 76.789 level confirmed a solid bullish breakout and supported prospects for additional gains. Strong follow-through buying would uplift spot prices toward the Mighty 200 Exponential Moving Average (EMA) at the 79.253 level en-route to the 80.000 round level, which will both act as a barricade against spot prices. A subsequent move above the aforementioned barriers would validate the bullish outlook and pave the way for more gains around the US WTI Crude Oil Future.
The RSI (14) level at 70.4350 is flashing overbought conditions and warrants some caution ahead of this week's key events/data risks. Additionally, the RSI portrays a bullish divergence suggesting that the buying pressure could increase. On the other hand, the moving average convergence divergence (MACD) is above the signal line, pointing to a bullish sign for price action this week. Additionally, The 20 and 50 Exponential Moving Average (EMA) crossover at the 75.569 level adds credence to the upside bias.
On the Flipside, if dip-sellers and tactical traders jump in and trigger a bearish reversal, the price will find support at the 77.759 support level. If sellers manage to breach this floor, the US WTI Crude Oil Future could turn vulnerable and accelerate the downfall toward the downward-sloping trend-line of the descending channel pattern (now turned key support level). Sustained strength below this barricade (solid bearish breakout) would pave the way for aggressive technical selling around the US WTI Crude Oil Futures.
