On Wednesday Oil prices spiked up, following supply disruption in Libya reaching near a 2015 high while a weak dollar gave further support price rally. Oil prices have seen 20% to 25% rise last month despite inventory buildup in US, and indications from the Organization of Petroleum Exporting Countries (OPEC) that it could decide to maintain its supply level during next month’s meeting. However, the rally in prices has stopped the demand for cutting output from OPEC.
The US Energy Information Administration (EIA) yesterday, released its latest survey. The report was expected to show a decrease in crude oil stocks with estimates at 1.55 million barrels but the actual was worse than expected falling to -3.882 million barrels.
Yesterday crude oil initially rallied but found enough selling pressure to give all its gains and close in the red near the open of the day, on above average volume. The commodity is still in a recovery phase and the stochastic is showing an overbought market but even with the commodity well into overbought territory, we should not fight the strong upward correction just yet.
Expecting upward move to a daily resistance at 63.70 on a bounce from a key level at 59.80 (scenario 1) or a break below a key level at 59.80 could push the commodity down to 57.26 (scenario 2).
LCrude is a CFD written over Light Crude futures.