The U.S. West Texas Intermediate crude September contract settled sharply higher on Friday, jumping about $1.8, or 3.84 percent to end at $48.654 a barrel. Despite its Friday’s rally, oil prices fell last week on signs that reports of weak Chinese demand deflated the market, but a rather bullish EIA report, a weaker dollar and a falling rig count provided some lifts.
Oil rose to the highest since late May amid tightening supplies and a broader market’s rally sparked by Steve Bannon’s departure from the White House. Government data earlier last week demonstrated that the stockpiles dropped the most since September last week, while U.S. crude production had the biggest weekly rise since June.
The removal of Bannon, the former chairman of Breitbart News, may calm the waters on Trump’s remarks on violence in Charlottesville, Virginia, which led to sustained questions about his ability to retain his team and implement his economic plans and U.S. energy strategy effectively.
A report updated by oilfield services firm Baker Hughes Friday morning, shows its weekly count of oil rigs operating in the U.S. last week fell by five rigs to a total of 763. A unit at Exxon (NYSE:XOM) Mobil’s Baytown, providing 584,000 barrel-a-day, the second largest refinery in the U.S., has been shut down. The reduced rigs are an important barometer for the drilling industry and serves as a proxy for decreased oil production supply.
Oil prices has lingered below $50 a barrel as the OPEC (Organization of Petroleum Exporting Countries) and its allies make efforts to cut supplies and help rebalance the market. Besides members in OPEC, 10 more producers outside the cartel, including Russia, agreed a deal to slash 1.8 million barrels per day in supply until March 2018.
In the week ahead, investors will keep a close eye on the weekly data on oil and gasoline stockpiles released by the U.S. Energy Information Administration.
Price of crude oil is currently trading slightly lower at 48.535 as of 12:16 p.m. in Sydney. With bullish signs that the Relative Strength Index (RSI 14) has been in a rise tendency at 53.9695, its price broke higher to a descending price channel, which was supposed to be a price formation in the last few months, after retreating from the breakout earlier this month. The second breakout is more likely to lead to further rise afterwards, but will face a resistance found at 50.271.
Chart 1: WTICOUSD Daily
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