In a wider picture, the overall trend remains bullish

Oil prices rallied to fresh three-year highs around $83.50 on Wednesday before correcting lower as traders proceed to profit-taking after a solid rally. Today, Brent crude extended the retreat from peaks and was trading below the $80 figure during the European hours following failed recovery attempts seen earlier in the day. 

The U.S. Energy Information Administration said on Wednesday that U.S. crude inventories rose by 2.3 million barrels last week. Gasoline inventories also increased, sending the prices lower in a corrective move.

Furthermore, the ascent in the oil market was halted by another rally in the dollar. The greenback climbed to fresh yearly highs after a report from ADP showed that 568,000 private-sector jobs were created in September versus 425,000 expected. Now, investor focus shifts to a closely watched nonfarm payrolls report due on Friday. If the figures surprise on the upside, the USD index would extend the rally across the board. In this scenario, oil prices could struggle to see a recovery ahead of the weekend.

Also, oil prices declined the most in two weeks after Russia signaled it is ready to help ease a global energy crisis. In particular, President Vladimir Putin indicated that the country will ramp up gas exports to stabilize energy markets. Meanwhile, U.S. energy secretary Jennifer Granholm raised the prospect of releasing crude oil from the strategic petroleum reserve, thus adding to the selling pressure surrounding oil prices.

From the technical point of view, a break below the $80 figure implies that Brent crude could see deeper losses in the short term. Now, the $79 mark acts as the immediate support that triggered a bounce higher in recent trading. Still, oil remains elevated at the current levels, suggesting there could be a more pronounced downside correction before a reversal. At that, the overall trend remains bullish in a wider picture.


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