Aiming for February Peak Ahead of US Retail Sales

Crude Oil, EIA Inventory Report, US Retail Sales and Industrial Production – Talking Points:

  • Crude oil prices gained despite weakness on Wall Street
  • The latest EIA inventory drawdown smashed expectations
  • WTI could be setting up to revisit February peaks ahead

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Crude oil prices rose to the highest in almost a month despite a fairly late ‘risk-off’ tilt during Wednesday’s Wall Street trading session. The growth-linked commodity often tracks global equity markets. On Wall Street, the S&P 500 and tech-heavy Nasdaq Composite declined 0.41% and 0.99% respectively.

The divergence between oil and stocks likely occurred due to strong fundamental tailwinds. EIA inventory data showed that US oil stockpiles shrank by 5.89 million barrels last week. Not only was this the most in about 2 months, but it significantly overshot the -2.7m estimate. Energy shares outperformed on Wall Street.

Meanwhile, the International Information Association also revised the outlook for global oil demand this year to 96.7m barrels per day. This is up from 96.5 prior, likely driven by rising vaccination rates around the world and aggressive fiscal stimulus in the world’s largest economy.

Risk appetite was fairly contained during Thursday’s Asia-Pacific trading session. The focus for WTI is thus shifting to US retail sales figures and industrial production over the next 24 hours. Those are expected to increase 5.8% m/m and 2.5% m/m respectively. Better readings could add further upside momentum to WTI.

Crude Oil Technical Analysis

WTI crude oil closed above key resistance at 62.245, the March 30th high. That marked the highest point since March 18th. This also exposed peaks from February, which align closely with highs from 2019 and 2020. As such, this zone could be key resistance which if taken out, opens the door to resuming the dominant uptrend.

WTI Crude Oil Daily Chart

Crude Oil Price Outlook: Aiming for February Peak Ahead of US Retail Sales

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter