Crude oil price edged higher on Wednesday as weather disruptions and a weaker US dollar bolster the asset. At the time of writing, Brent oil was trading at $66.62 as the bulls gather enough momentum to break the resistance at $66.77. At the same time, the benchmark of US crude oil prices, WTI, rallied to its highest level in four months before easing slightly to $62.64. Nonetheless, once the weather-driven supply worries subside, the selling pressure will likely return.
Crude oil price pauses at a crucial resistance level
Crude oil price has extended its previous gains as the extreme cold weather in the US disrupts production and heightens supply concerns. The winter storm has impacted oil exports from the country’s Gulf Coast with analysts estimating that about 2 million bpd were halted from the region over the past weekend.
Subsequently, oil stockpiles in the coming weeks are expected to show significant draws. Signs of tighter supplies in the world’s largest oil consumer are set to continue supporting global prices. Recent data from the American Petroleum Institute (API) indicated that oil inventories dropped by 0.25 million barrels compared to the expected build of 1.45 million barrels. Analysts expect EIA’s official data to show a draw of 0.20 million barrels from the previous week’s increase of 3.60 million barrels.
Notably, a weaker US dollar is also supporting crude oil prices. Ordinarily, a decline in the value of the greenback makes the commodity less expensive for buyers holding foreign currencies.
On Tuesday, the dollar index plunged to its lowest level since February 2022 at $95.56. While it has since eased to $96.21, it remains under selling pressure amid the worries over the US policies and politics. Interestingly, when asked about the value of the dollar, President Trump has asserted that it is “doing great”.
Meanwhile, the amount of Russian oil being pumped into tankers is increasing as buyers pullback. Recent data indicate that Russian oil exports to India were at 1.12 million barrels a day as of 25th January. This follows the slump recorded last month when India’s Russian oil imports plunged to a three-year low at 1.2 million bpd. This drop has caused a surge in oil tankers idling along the coast.
Brent crude oil price technical analysis
The benchmark for global oil prices, Brent, is on the verge of a breakout after rising past the long-term 200-day EMA as seen on its daily trading chart. It is also finding support in the formation of the bullish golden cross pattern, formed about a week ago when the short-term 25-day EMA crossed the medium-term 50-day MA to the upside.
Amid the weather disruptions and supply woes, the bulls are keen on breaking the crucial resistance at $66.77. At the time of writing, it was trading at $66.62. If successful, crude oil price may pause at $67.73. Even with a further increase, I expect Brent oil price to face steady resistance at $68.62. On the flip side, a pullback past its current support level of $66 will likely activate the lower level of $64.50.
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