Crude Oil Price Update – Strengthens Over $71.11, Weakens Under $70.72

U.S. benchmark Brent crude oil futures are trading higher early Wednesday after an industry report showed a bigger-than-expected drawdown in U.S. crude stocks in the wake of two hurricanes, highlighting tight supply as demand improves.

At 04:48 GMT, December WTI crude oil is trading $70.89, up $0.75 or +1.07%.

The American Petroleum Institute (API) late Tuesday reported a draw in crude oil inventories of 6.108 million barrels for the week ending September 17. Analysts were expecting a decline of 2.400 million barrels for the week.

The API also reported a draw in gasoline inventories of 432,000 barrels for the week-ending September 17 – compared to the previous week’s 2.761-barrel draw. Distillate stocks saw a decrease in inventories this week of 2.720 million barrels for the week, compared to last week’s 2.888-million-barrel decrease.

Cushing inventories fell this week by 1.748 million barrels after last week’s 1.345-million barrel decrease.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $72.39 will signal a resumption of the uptrend. A move through $67.04 will change the main trend to down.

The main range is $61.11 to $72.39. Its retracement zone at $66.75 to $65.42 is support.

The short-term range is $67.04 to $72.39. Its retracement zone at $69.72 to $69.08 is also support. This zone stopped the selling at $69.05 on Tuesday.

The minor range is $72.39 to $69.05. Crude oil is currently testing its retracement zone at $70.72 to $71.11. Trader reaction to this zone should set the tone of the market on Wednesday.

Daily Swing Chart Technical Forecast

The direction of the December WTI crude oil futures contract on Wednesday will likely be determined by trader reaction to $70.72 and $71.11.

Bearish Scenario

A sustained move under $70.72 will indicate the presence of sellers. If this creates enough downside momentum, then look for the selling to possibly extend into the short-term retracement zone at $69.72 to $69.08.

Bullish Scenario

A sustained move over $71.11 will signal the presence of buyers. If this move generates enough upside momentum then look for a surge into the pair of main tops at $72.39 and $72.61 over the short-run.

Today’s U.S. Energy Information Administration (EIA) Weekly Inventories report, due to be released at 14:30 GMT, could be the catalyst that triggers a breakout to the upside if the government reports a crude oil drawdown greater than the 3.3 million barrel estimate.