Relationship Between Crude Oil And U.S. Dollar In February 2018

On Thursday, the price of black gold moved higher after the EIA weekly report showed an unexpected decline in crude oil inventories. Is this one bullish factor strong enough to push light crude higher in the following days? What did the buyers miss?

Yesterday, the Energy Information Administration reported that crude oil inventories declined by 1.6 million barrels in the week ended Feb. 16, beating expectations for a gain of around 1.8 million barrels. This first in four weeks decline in crude oil stocks in combination with a smaller than expected increase in gasoline inventories and drop in distillates supplies encouraged oil bulls to act. As a result, the price of black gold climbed to an intraday high slightly above $63, but did this increase change the short-term outlook for crude oil?

Crude Oil’s Technical Picture

Let’s take a look at the chart below (charts courtesy of http://stockcharts.com).

From today’s point of view, we see that the previously-broken upper border of the yellow consolidation withstood the selling pressure once again, which encouraged oil bulls to act. Thanks to their charge, the price of crude oil broke above the Tuesday’s peak and closed the day above the 50% Fibonacci retracement, which is a positive development.

What does it mean for oil bears? In our opinion, nothing more than information that we can see one more upswing and a test of the 61.8% Fibonacci retracement and the previously-broken lower border of the blue rising trend channel, which is slightly above it. Such price action would be even in line with the commentary from our Tuesday’s alert:

(…) please keep in mind that black gold remains below the previously-broken lower border of the black rising trend channel, which means that as long as there is no invalidation of the breakdown under this line all upswings will be nothing more than verifications of the earlier breakdown.

Additionally, when we look at the very short-term chart, the volume accompanying recent increases still raises some doubts about the strength of the demand side and increases the probability that reversal may be just around the corner.