The current state of the market looks neutral, suggesting there are no strong bullish or bearish risks for Brent crude

Oil prices rose on Wednesday after the Energy Information Administration reported a crude oil inventory draw of 2 million barrels for the week to September 25 versus the expected build of 1.4 million barrels. Gasoline inventories declined by 700,000 barrels last week, also adding to upbeat market reaction.

As a result, Brent crude bounced from two-week lows below $41 and finished the day around $42, where the futures where changing hands at the time of writing. Still, Brent saw decent losses in September after five consecutive months of gains in a row. 

Now, the oil market is at a crossroads, with conflicting drivers being in play at this stage. On the positive side, oil inventories decline, OPEC+ production cuts, fairly upbeat economic data, and stimulus hopes help the market to stay afloat. Meanwhile, the ongoing coronavirus pandemic, rising political uncertainty, a gloomy outlook for oil demand recovery, and an increase in Libyan oil production cap bullish attempts in the market.

As such, the current state of the market looks neutral, suggesting there are no strong bullish or bearish risks for Brent crude. Traders will continue to assess developments surrounding the pandemic as further rise in cases could add to the downside pressure and send risky assets into a broader bearish correction. Considering this risk, it looks like traders will further tend to sell the futures on rallies due to the persisting uncertainty.

In the short term, Brent needs to make a decisive break above the $42 handle on a daily closing basis. Otherwise, the recent lows below $41 will come back into market focus. The current level is strengthened by the 100-daily moving average, suggesting the market could need the additional bullish catalyst to make the breakout. As long as risk sentiment remains positive, Brent will likely stay afloat in the immediate term.

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