Oil prices have been rallying recently based on both demand side and supply side pressures. On the demand side, the four-week average of the total product supplied in the U.S. rose to about 21 million barrels per day. This is the highest amount since March last year. Similarly, crude oil stockpiles settled at 432.6 barrels last week, dropping 3 million barrels. The data suggests a rise in demand by consumers owing to a curb in rising coronavirus cases and economic reopening. During the last three days, both Brent and WTI soared nearly 10%.
On the supply side, oil prices gained support from the fall in production by Mexico after the spark of a fire in one of its oil setups. However, the state-run production unit is forecasted to resume output around Aug. 30.
Moving forward, fluctuations in oil prices are projected to continue, but traders can expect to see an overall strength in prices as economies get closer to pre pandemic normalcy and OPEC continues to remain disciplined in its supply.
Technical Analysis
Crude oil prices have crossed above the 200-day SMA on the daily time frame and now the price is likely to challenge the 100-day SMA on the daily time frame. There is no doubt that oil prices were extremely oversold and a snap back was likely to take place. The bulls still need to break the downward trend line, and once it is broken, we may see the crude oil price picking up more steam.
The near term resistance is at 74 while support is at 59.
