In a wider picture, Brent could face hurdles on the way north as the coronavirus pandemic continues
Oil prices extend gains, climbing for the fourth day in a row on Thursday. In recent trading, Brent crude rose to the $42.70 area where the 200-daily moving average lies. A break above this level could pave the way for further gains in the short- to medium-term.
The market continues to derive support from the US where oil workers evacuated rigs in the US Gulf of Mexico ahead of Hurricane Delta. This driver helps to ease concerns over fuel demand, while the resurgent hopes of at least partial fiscal stimulus in the United Stated add to the positive momentum in the market.
If positive risk sentiment in the global financial markets persists in the short term, Brent could challenge the mentioned moving average but the market will probably need the additional catalyst to make a decisive break above this important hurdle.
The EIA report showed on Wednesday that US crude oil inventories rose 0.5 million barrels last week versus an expected draw of 1.2 million while distillate and gasoline stockpiles contracted. The release failed to substantially affect market direction but did lift priced marginally in a knee-jerk reaction as gasoline demand persisted.
In a wider picture, Brent could face hurdles on the way north as the coronavirus pandemic continues, threatening the economic recovery and energy consumption globally. At the same time, as investors continue to hope for a vaccine and new fiscal stimulus in the US, downside risks look limited as well.
In the short term, Brent crude could retreat from intraday highs around $42.70 as the futures may lack the upside impetus to get back above the mentioned moving average. In this scenario, the initial support should be expected at $42.25 where the 100-DMA lies, followed by the $42 handle and the 20-DMA that arrives around $41.65. On the upside, a break above $42.70 will pave the way for the $43 barrier and then to the $43.30 region.