Fundamental outlook

Crude oil futures rises on Thursday and it is highly expected to retest the previous peak at around 68$ in the coming days before the fed meeting next week.

The Energy Information Administration report on U.S crude oil inventories showed crude stockpiles surge by 13.8 million barrels last week.

However, many other factors offset the bearish EIA inventories report.

Firstly, the EIA report itself reported a surge in gasoline demand, which is a good sign for recovery in transportation, mobility, and the overall economic activity.

The U.S stimulus relief package, has been approved on Wednesday and waits for the President Joe Biden signature on Friday, is expected to stimulate growth and business conditions as well as to help families and small businesses. All that is expected to increase oil and energy demand.

 Another major factor is the recent decline in the dollar which will drive oil prices higher before the fed meeting next week.

ahead of the FOMC meeting on Wednesday March 17, we expect a rise in the dollar and markets volatility, as the Fed chair Jay Powell is expected to comment on the recent rise in inflation and possible monetary policy tools to use if inflation spikes further at a higher momentum, which what we do expect.

Technical analysis

On the long term, crude oil has made a strong upward breakout of the long term downtrend. Which makes the case for a possible retest from above before resuming the upward move.

crude oil technical chart

On the intermediate term, the price is trending higher far above previous two quarters price levels of 38.60$.

On the short term, oil futures price is trading above past 3 weeks level of 60.27$ with more ups and downs, which indicates a rise in volatility and a decrease in momentum. This combination is a warning indicator for possible pull back in the price.    

crude oil technical chart

The possible price retracement is also indicated through the RSI bearish divergence pattern and its pullback from the overbought zone.