Crude Oil Price Rise May Stall as Supply Swell Swamps Demand

CRUDE OIL TALKING POINTS:

Crude oil prices surge after biggest US inventories draw in 2 months
Swelling US, OPEC+ supplies may limit upside follow-through scope
Key chart resistance eyed near $64/bbl on route to March swing top

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Crude oil prices are digesting gains having soared Wednesday thanks to a larger-than-expected draw on US inventories reported in weekly EIA flow statistics. The report showed stockpiles unexpectedly shed 5.89 million barrels, marking the biggest decline in nearly two months.

A pickup in US consumer confidence may help keep prices well-supported into the week-end. A survey from the University of Michigan is expected to put sentiment at the highest since March 2020, essentially marking a return to levels preceding the Covid-19 outbreak. That may buoy the energy demand outlook.

However, the economic revival against the backdrop of generous fiscal and monetary stimulus as well as expanding vaccination has brought with it rebuilding US output levels. Data from Baker Hughes is due to show the number of active extraction rigs hit a 12-month high last week.

This pickup in production coupled with the unwinding of the OPEC+ supply cap scheme may limit scope for crude oil price gains. This is particularly as implied demand levels telegraphed in DOE statistics hit the one-year ceiling near 18 million barrels/day.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices shot higher to retest the inflection level at 63.86. A daily close above this barrier would call into question the bearish reversal registered in mid-March and open the door for a retest of the swing top at 67.98. Alternatively, slipping back below the March 30 swing top at 62.27 puts the range floor may set the stage for a return back below $60/bbl to revisit the range floor at 57.25.