Crude oil prices building on gains following a stellar performance last week. WTI crude oil surged over 6% higher across the previous week and up an additional 0.7% at the time of writing.
What is supporting oil prices?
1. Macro data
WTI soared across the previous week as a combination of factors lined up. Strong economic data from both the US and China boosted optimism surrounding the global economic recovery. China’s GDP surged to 18.3% YoY in Q1, whilst retail sales jumped 34.2% indicating that the consumer recovery is well on its way. Meanwhile, in the US retail sales jumped 9.8% MoM in March smashing expectations as the US economy reopened.
2. US petrol demand
In addition to macro data, the US department of transport revealed that for first time since the pandemic started, driving on US motorways is higher now than it was at the same time in 2019. As the US economy re-opens fuel demand is picking up – even before driving season begins.
3. Inventory data
EIA inventory data revealed that there was a bigger than expected draw in US stockpiles. Crude stockpiles dropped by 5.8 million barrels last week significantly more than the 2.8 forecast.
4. Upwardly revised demand outlook
Both the International Energy Agency and OPEC raised their oil outlook demand for the year. Global oil demand is now expected to grow 5.7 million b/d in 2021 to 96.7 million bpd owing to the quick vaccine rollout and US plans for huge economic stimulus spending. China’s crude imports were up 21% YoY
However, uncertainties remain, and these are just dragging on WTI prices at the start of the week. Covid cases are rising. More people are ill with covid now than at any other point through the pandemic. Europe continues with its ongoing lockdown. Several emerging market economies are under growing strain due to a resurgence of covid. Brazil and parts of South America are seeing covid numbers surge.
India is seeing record new daily cases of over 270,000. India is the worlds third largest importer of oil, consuming almost 10% of worldwide crude exports. Lockdown restrictions were imposed over the weekend with the capital New Delhi entering a 6 day lockdown in the country. Further lockdown restrictions could dampen global demand further.
Where next for WTI crude oil?
WTI broke above its descending trendline dating back to early March and also pushed over its 20 & 50 EMA on the 4 hour chart in a bullish break out. The 20 EMA also crossed over the 50 EMA in a bullish signal.
However, the recovery stalled just shy of 6400 last week’s high at 63.83. The RSI remains in positive territory buts lacks a strong directional bias.
63.83 remains the key resistance. A break above here could see WTI head back towards $64.85/$65.00.
On the flip side the 20 EMA offers immediate support at 62.75. A break below here could open the door to support at 61.80 the 50 EMA. A break below the 50 EMA could negate the current uptrend and see the sellers target 60.00.