Crude Stores Fall

Oil prices are turning higher into the back end of the week with crude future bouncing off support at 77.64.  The catalyst behind the bounce was yesterday’s EIA inventories release which surprised to the downside. The group posted a drawdown of 1.4 million barrels over the prior week, taking total crude stores down to 459.5 million barrels. Crude production was seen holding steady at 13.1 million bpd while crude imports were seen rising 134k bpd per day 6.7 million bpd. Exports were also seen rising by 440k bpd to 4.6 million bpd.

Iran Adding Supply

The unexpected drawdown in crude stores was seen offsetting the news that Iran plans to add between 300k and 400k bpd in supply. Indeed, even a stronger US Dollar isn’t holding back the rebound in crude prices currently. Another factor driving the rebound here is the narrowing of time-spreads which had been showing signs of weakness recently. With time-spreads reversing recent declines, however, the near-term outlook is improving for crude.

Bullish Outlook

Looking ahead, there looks to be room for crude prices to rebound further, particularly if time-spreads continue to improve. USD will remain a focus point, any intensification of the rally through US data today and tomorrow might create near-term headwinds for crude. However, for now, the outlook remains positive and in favour of a continued recovery.

Technical Views

Crude

The sell-off in crude has stalled for now into a test of support at the 77.64 level. Price is now retesting the underside of the broken bull channel. With momentum studies turning higher, if price can hold this support level, focus will be on a test of the 82.59 level next.