The strategic U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels last week, say the Energy Information Administration (EIA).
This performance outstripped the preliminary market expectations, which were projecting another contraction by 6.5 million barrels. This is only the second weekly gain for 2020.
The weekly report of the EIA covers the week ending the 19th of February, which was when the cold weather gripped the U.S., causing a massive upsurge in energy demand and distorted crude oil production.
These impediments to the production process led to:
"U.S. crude oil refinery inputs averaged 12.2 million barrels per day during the week ending February 19, 2021 which was 2.6 million barrels per day less than the previous week’s average. Refineries operated at 68.6% of their operable capacity last week. "
Consequently, oil futures rose by more than 2 per cent so far into today's trading session, despite the bigger-than-expected inventories data. The price of crude continues to rally steadily, reaching its highest level in 2020 so far.
Even though bulls retain control at present, the price of crude could take another dive in the near future. That is so owing to the fact that the weather is improving and production will soon be able to reach prior levels. Moreover, the hawkish inventories data is likely to jolt the current supply and demand equilibrium, easing some of the underlying buying pressure.
As can be seen on the 4H chart below, the price of crude oil futures is currently strengthening above the psychological support at 60.00. While the uptrend looks poised to continue accelerating over the next several days, a throwback to the support is also likely.
The expectations for continued price appreciation are supported by the MACD indicator, which currently illustrates the market's rising bullish momentum.
However, if the underlying supply and demand equilibrium is indeed affected by the aforementioned changes in the near future, the strength of the uptrend is bound to get tested. A decisive breakdown below 60.00 would likely manifest the termination of the uptrend.