Oil Breaks $75 Mark on US Inventory Declines

WTI crude futures (NYMEX: CL) exhibit resilience, trading above $75 per barrel and maintaining momentum for the second consecutive session. The surge is underpinned by a substantial 9.233 million barrel decline in US crude inventories, marking the largest draw since August and surpassing market expectations. This draw, attributed to winter weather disruptions and a decline in imports, propels oil prices.  

Additionally, China’s People’s Bank announcement to reduce banks’ reserve ratio fuels optimism, injecting about $140 billion into the banking system to support the nation’s economy. Geopolitical tensions persist as a coalition led by the US and UK conducts strikes against Houthi fighters in Yemen, adding an extra layer of complexity to the oil market. 


The 4-hour chart shows that price action resides within a rising wedge pattern, comfortably supported by the upward-sloping 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line). This formation hints at sustained upward momentum, with SMAs likely to provide significant support to the price action. 

The Relative Strength Index (RSI) hovers just above 65, indicating strong bullish momentum with ample room to run before entering overbought territory. For short-term trading opportunities, the immediate levels of interest lie at $74.05/BBL support and $76.17/BBL resistance. A break below $74.05/BBL could trigger a retracement towards the $72.94/BBL support zone, while a sustained push above $76.17/BBL with significant volume could confirm the bullish breakout, potentially opening the door to $77.15/BBL. 


WTI crude’s near-term outlook remains undeniably bullish, fuelled by a confluence of factors: tighter inventories, potential Chinese economic growth, and lingering geopolitical tensions, with a sustained push above $76.17/BBL, with significant volume likely to signal a successful breakout, potentially paving the way for a charge towards $77.15/BBL.   

Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

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