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WTI advances toward previous support – more upside in the cards?

If oil is able to overcome recent resistance, we may witness another move upwards for this commodity.

Stockpiles data came out bullish

On the week of March 24th, according to available data, US oil stocks also decreased significantly. The inventory decline was the most significant since late November, showing that demand in the world’s top oil user was rising in response to improved weather conditions. The demand for distillates, however, remained modest.

The WTI oil benchmark moved 1% higher on Thursday, approaching a critical short-term resistance level of around $74.60 per barrel. This came after a flat day on Wednesday, when oil closed slightly lower, building the tension for more upward motion.

Don’t miss: Natural gas production may rise with US and Canada in charge

Furthermore, for the first three weeks of March, Russia reduced output by roughly 300,000 barrels per day (bpd). Although the number was less than the Kremlin’s goal of 500,000 bpd, experts highlighted that it signalled a tightening of global supplies.

Iraqi pipeline shutdown continues. According to corporate statements, many oilfields in the semi-autonomous Kurdish region of northern Iraq have shut down or decreased output due to the shutdown of the northern export pipeline. Citi analysts indicated on Thursday that the Kurdistan-Iraq premium in oil prices might fade sooner than predicted. Citi estimates that pipeline flows might increase by around 200,000 barrels per day as a result of “changes in Iraq’s internal politics,” which could lead to a lasting political solution.

OPEC+ and China are the main players in oil production and demand data

Five delegates from the producer group told Reuters that OPEC+ is expected to stick to its existing agreement to limit oil production at a meeting on Monday. This comes after oil prices rebounded after falling to 15-month lows.

During Monday’s discussions, a delegate stated, it is difficult to anticipate any fresh developments.” A second individual argued that the Kurdistan restrictions and recent price declines were insufficient to change the overall OPEC+ policy trajectory for 2023.

You can also read: Gold jumps as stocks fall, but confidence remains weak

OPEC+ decreased its output target by 2 million barrels per day in November 2022 – the highest reduction since the onset of the Covid epidemic in 2020. The same reduction applies for the entirety of 2023.

Attention now shifts to Chinese manufacturing and service sector activity statistics. These are coming on Friday, to measure the status of an economic revival three months after the reopening of the Chinese economy following the Covid restrictions.

The country still faces headwinds from weak export demand and slow domestic consumption, so economists predict some moderation in economic development. As investors re-evaluate their assumptions on a Chinese economic comeback this year, a weak reading might pose some near-term threats to oil prices.

 Another exciting topic: What should you know about Saudi Aramco’s trip to China?

This year, China is estimated to drive a significant recovery in oil demand. However, the nation’s economic indicators have shown a restricted need for oil in the previous two months.

Oil is looking for a rescue

After a huge dump with regards to the banking crisis, oil seems to have recovered quite nicely. The $70 mark has been stable, and the bulls have been winning almost every day to recover the losses. The battle continues, and as is common for oil, the demand is a key price driver on which traders decide their market entry.

As noted before, the main resistance is currently located near $74.60 on the broken uptrend line. If the price climbs over this level, it might be a significant positive signal that sends oil prices back near $80. The intraday support remains near the previous lows at $72.35; if not sustained, oil may easily retrace to $70.

wti

WTI 1D chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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