Crude Oil Gains Ground, U.S. Inflation Improves

Crude appears headed to its first winning day this week, as West Texas Intermediate has climbed close to 1.0 percent.
Kenny Fisher
Offshore Oil Rig Drilling Platform

Crude oil has posted gains on Wednesday, after two losing daily sessions. In North American trade, West Texas Intermediate crude oil futures are trading at $57.25, up $0.57 or 0.85%. Brent crude oil futures are trading at $62.40, up $0.38 or 0.62%.

Hong Kong Braces for More Violence

Hong Kong is fast becoming a geopolitical hotspot, which could affect crude prices. The city is fast descending into chaos, as demonstrators continue to clash with police on a daily basis. Protesters, which have numbered in the tens of thousands, are demanding more political freedom, which could unleash a harsh response from the Chinese regime. If the violence continues, there is a danger that China will respond more forcefully and send in troops to suppress the demonstrations. This could sour investor risk appetite, especially with the Chinese economy under strain from the U.S-China trade war.

U.S. Inflation Improves in October

Consumer inflation was unexpectedly strong in October, with a gain of 0.4%, up from 0.0% a month earlier. This marked a 7-month high. The core reading ticked up to 0.2%, up from 0.1% in September.

EIA Projects Another Inventory Surplus

The U.S. continues to report inventory surplus for crude, with another gain expected this week. The Energy Information Administration (EIA) has posted only one drawdown in the past seven weeks, and the past two weeks have seen large surpluses, with readings of 5.9 million and 7.9 million, respectively. This points to large stockpiles, which has put downward pressure on crude prices. A smaller surplus is projected in the Thursday release, with an estimate of 1.60 million.

Crude Technical Analysis

Crude prices remain range-bound, but we are seeing some upward pressure on resistance at 58.15. On the downside, the 200-EMA is located just below crude, at 56.97. This line could act as short-term support. This is followed by support from the 50-EMA, which is currently at 55.68. Below, we find support at the round number of 55.00.

WTI/USD 1-Day Chart
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