U.S. West Texas Intermediate and international-benchmark crude oil finished lower on Thursday with the latter posting the biggest gain.
December WTI crude oil settled at $52.64, up $0.46 or +0.88% and January Brent crude oil finished the session at $59.04, up $0.81 or +1.39%.
Prices inched lower early in the session due to an unexpected increase in U.S. crude inventories, high U.S. production and exports. Prices recovered from the early session weakness to post a strong gain, boosted by comments from Saudi Arabia’s Crown Prince backing the extension of OPEC-led production cuts.
Forecast
WTI crude oil rose on Thursday to its highest level since September 28 after buyers took out the previous main top at $52.65. There has been no follow-through to the upside early Friday which suggests yesterday’s price action may have been fueled by buy stops rather than new buying. This could be a sign that short-covering is driving the market higher and that real buyers are waiting for a better price rather than chasing the market higher.
If the rally continues then $53.11 becomes the next upside target.
The buying is stronger in the Brent crude oil market. It reached a new high for the year on Thursday. The rally could gain momentum if buyers continue to come in strong. Falling back below the previous tops at $58.89, $58.35 and $58.20 will indicate the current buying is short-covering.
The rally is currently being driven by speculation. The real buying may come in after the OPEC-led coalition actually approves the extension to limit production. This may not take place until the cartel meets in Vienna on November 7. Until then, the markets are still vulnerable to a two-sided trade because of concerns over U.S. crude production.
Crude oil is an attractive buy because the trend is up on both the daily and weekly charts, however, I would wait for pullbacks into support rather than buying strength.