Crude Oil Forecast: Price Sets Fresh High as Bulls Eye More Upside
Crude Oil, Supply, EIA, Energy – Talking Points
- Crude oil prices are moving higher after surprise inventory draw
- USD weakness helping to bolster price amid increasing demand
- The 90 psychological level is quickly approaching as bulls reign
The price of crude oil is rising through the Asia-Pacific trading session, extending gains from overnight when bulls pushed prices higher on a surprise US inventory draw. Crude oil stocks fell 431k barrels for the week ending October 15, according to the Energy Information Administration (EIA). That was well under the nearly 2 million barrel build analysts expected.
The surprise supply draw bolsters concern for the market’s ability to meet demand, driven by consumer activity. Economic consumption is returning in force as Covid-induced restrictions loosen across major economies. Furthermore, the EIA numbers were somewhat of a “double whammy” given that the API reported a build for the same period just a day prior.
While oil prices are moving higher on its supply and demand relationship, another factor is at play: the US Dollar. Although not as strong of a driver, the strength of the dollar has receded this week. The USD DXY index is on track to drop for a second week, with prices currently tracking near 0.5% lower. A weaker dollar makes oil cheaper for foreign buyers, which typically encourages buying.
Crude Oil Technical Forecast
Prices have cleared the 161.8% Fibonacci extension of the late September/August move after pivoting higher from the 9-day Exponential Moving Average (EMA) earlier this week. Given the 7-year high, prices have some room to run before any specific resistance is offered.
While the 90 level is still a bit over 7% away, if the current trend holds, that level will quickly shift into focus. Alternatively, the 9-day EMA may provide support on a pullback. The Relative Strength Index (RSI) remains in overbought territory above 70.
Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
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