OPEC raised its forecast for global oil demand growth
Oil prices have finally managed to overcome the 20-DMA on Tuesday, extending the ascent today. Brent crude surged to early April highs around $64.83, targeting the $65 next barrier during the European hours.
Oil market sentiment was boosted by the news that Us crude oil stockpiles fell 3.600 million barrels for the week ending April 9th, compared to a 2.800-million-barrel decline forecast, according to the API. The figure marks recovery in underlying demand and refinery activity in the United States.
Furthermore, OPEC raised its forecast for global oil demand growth this year to 5.95 million barrels per day in its monthly report released yesterday. The organization highlighted that “the recovery is very much leaning towards the second half of this year”.
Also on the positive side, the dollar fell across the board despite stronger-than-expected inflation figures. On a seasonally adjusted basis, the CPI index rose 0.6%, marking an eight-year high.
Against this backdrop, Brent crude witnessed a breakout that could bring the futures back above the $65 figure by the end of the day if the official report from the EIA points to a decline in US crude oil inventories by more than 3.5 million barrels.
In the longer term, the outlook for oil prices will continue to depend on coronavirus developments and the economic recovery from the pandemic, as risks for energy demand persist. For now, another COVID-19 wave hitting India cast a shadow on the demand outlook as India is the world’s third-largest importer of crude oil.
From the technical point of view, Brent crude needs to make a decisive break above the $65 immediate resistance in order to extend gains in the short term. If this level doesn’t give up any time soon, a local downside correction could be expected amid the potential profit-taking. Anyway, the path of least resistance points to the upside at this stage, especially as the greenback remains under selling pressure.