By the end of August, external factors for the oil market turn favourable. And the major reason for it is the OPEC+ decisions that were made this week.
Despite improving fundamental market indicators OPEC+ underlined still existing uncertainty in the market. Nevertheless, the cartel and its allies confirmed their decision to move forward with increase in production by 400,000 barrels per day in October.
On the other hand, Hurricane Ida that already took away the life of at least 59 people in the United States has contributed to the rally of crude prices. More than 90% of the Gulf of Mexico’s oil production was still shut. Despite the Ida was downgraded from fourth to first category the hurricane has flooded New-York City, New Jersey and Connecticut taking at least 46 people death toll in U.S East Coast.
U.S. President Joe Biden has recently authorised to release 1.5 million barrels of crude from the government’s emergency stockpiles.
Exxon Mobil Corp (NYSE:XOM) has already using state gasoline reserves to gasoline production in Louisiana. Crude reserves data in the United States came out this week contributed to the rally of crude prices too as the Energy Information Administration reported the decline of the reserves by 7.17 million barrels to 425.6 million barrels, while analysts were expecting the decline just of 3.08 million.
Technical picture a week before suggested crude prices to climb as on weekly chart the bullish engulfing candle was formed amid sustainable long-term support level that is lasting since April 2020. The correction of Brent crude prices on August 20-23 led the price to touch this upward trend for the third time, and while it was confirmed we received a clear upside signal.
If we consider a daily chart for Brent crude prices the resistance line that connects July 6 and July 30 highs is now going through the value of $74.15-$74.20 per barrel. If prices would manage to hold above this level than we may see a further rise of crude prices as the downward channel that was lasting for the last two month would be broken through. In this case, we may see Brent crude prices surging up to $82.5-$83 per barrel.
Another reason for such a scenario is that the downside correction of crude prices from $77.84 highs to $64.6 per barrel was in a form of downward zigzag that is typical for ABC correction pattern. A breakthrough of the peak at $76.38 per barrel within the last wave would confirm this scenario and present another reason for opening long positions for crude contracts.