The rallying dollar caps the upside potential in the market as well
Oil prices encountered resistance represented by the 20-DMA and were last seen holding relatively steady above the $81 figure. Still, Brent crude remains vulnerable amid the US-led coordinated release of stocks from strategic reserves. As a reminder, Biden announced a coordinated release of oil between the US, India, China, Japan, South Korea, and the UK after OPEC+ countries have repeatedly dismissed the US calls to increase supply and ease prices.
On the data front, the Energy Information Administration reported on Wednesday that crude stockpiles rose by 1.017 million barrels last week. On the positive side, gasoline inventories showed a draw of 603,000 barrels while distillates stockpiles declined by nearly 2 million barrels in the week. However, the oil market ignored the report to focus instead on the news that the head of the International Energy Agency called on the alliance to take measures to help bring oil prices down to lower levels. Of note, the OPEC+ meeting is due next week.
From the technical point of view, Brent crude lacks arguments to regain the 20-DMA, currently just below the $82 figure, with downside risks persisting at this point. On the downside, the futures need to hold above the $80 level in the near term in order to avoid another dive under $78 where this week’s lows arrive. In a wider picture, the technical outlook has improved somehow this week following five weeks of losses in a row.
The rallying dollar caps the upside potential in the oil market as well. The greenback rose across the board yesterday due to a combination of strong economic data out of the United States and the Fed’s hawkish minutes. Today, the US currency corrects lower slightly but remains strong and elevated in general.