U.S. West Texas Intermediate (WTI) crude oil rose to trade over $67 after the weekly report by the American Petroleum Institute (API) on Tuesday showed that inventories fell by 1 million barrels. Crude oil prices have been boosted recently due to the high risk of potential supply disruptions resulting from the conflict in the Middle East. There is also concern that the supply from Iran could be lost if President Donald Trump does not agree to extend the sanctions waiver on May 12. Venezuela is also a risk to supply, with falling output due to political and economic issues. However, the escalation of conflict in Syria is receding and U.S. oil production continues to oversupply global markets, with the Baker Hughes rig count climbing by 7 to 815 last week.
Official inventory data from the U.S. Energy Information Administration (EIA) is due out later on Wednesday and should be watched for further clues.
On the monthly chart, WTI is testing a confluence of the 200MA and 50% Fibonacci retracement at the 66.0-67.0 level. The 200MA has previously acted as support and resistance for WTI and could prove difficult to break. However, an upside break could open the way for further gains towards the 61.8% retracement at 76.50.
On the daily chart, WTI is trading above the breakout level of 66.30 but in the monthly resistance zone. A break of the highs at 67.75 could lead to further gains towards Fibonacci extensions at 68.80, and then 71.70. A reversal below immediate support at 66.30 is needed for further declines towards trend line and horizontal support at 64.20.
By Edward Anderson, FxPro Analyst