Fundamental Overview: Oil benchmarks shrugged off the bearish US inventory report released yesterday and jumped to five-month highs. The American Petroleum Institute (API) reported a build in crude oil inventories of 3.0 million barrels for the week ending March 29, exceeding analyst expectations of a 425,000-barrel draw.

Oil prices are moving higher over the last four months as supply fundamentals remain constructive with OPEC+ making good progress on pledged output cuts, while involuntary production losses in Iran remain sizable and those in Venezuela continue to grow. The EIA reported that U.S. oil production fell in January by 90,000 bpd, offering more evidence that suggests the shale industry slowed production at the end of last year when oil prices collapsed. Also, Bloomberg's latest survey found OPEC output fell for the fourth straight month, with Saudi Arabia continuing to curb production and Venezuelan output suffering as its economic and political crisis deepened; OPEC output fell by 295K bbl/day to 30.38M, according to the survey. The oil market is facing supply issues amid supply cuts led by producer club OPEC as well as the U.S. sanctions on Venezuela and Iran. OPEC and allies such as Russia, referred together as ‘OPEC+’, have agreed to withhold around 1.2 million bpd of oil supply this year to support markets.

Technical Overview

Over the past 4 months oil prices are in a strong uptrend with the commodity hitting its highest level since October 2018 (62.94). The price broke above 50% Fibonacci level last week and currently is approaching the 38.2% Fibonacci level. On the Daily Chart the price is above all three MAs (MA (200), MA (50) and MA (100)) and this position is signaling that the uptrend is still very strong. Nevertheless, short-term weakness can be expected as RSI, MACD and Stochastic are all in overbought territory. If the price continues with its strong uptrend, it can reach R1 (64.195) which is 38.2% Fibonacci level and if it keeps its strength the price can go further up towards R2 (66.855) and R3(69.206). But if the price starts correcting strongly, it can go back down to 50.0% Fibonacci level, S1 (60.112) or even further to S2 (57.885) and S3 (56.029).

Graph: (Crude Oil, Daily)