Crude oil gained 2% – Will it gain further or not?

Crude oil witnessed a more than two per cent rally yesterday. Prices were sparked near two-week highs after mixed signals on U.S. crude inventories. Further, a prospective of more cues on monetary policy from the Federal Reserve also weighed on sentiment.

Crude got strong support as interest rate cuts in China sparked some bets on a recovery in demand later this year. A surge in broader commodity markets also fueled bets on tighter oil supplies.

Further, U.S. dollar continued to weaken against its major counterparts  after Fed Chair Jerome Powell presented a less hawkish stance than some were expecting during a Senate testimony. Powell is now set to testify before the Senate Banking Committee later in the day, providing more cues on monetary policy.

Adding to this, data from the American Petroleum Institute (API) showed on Wednesday that overall U.S. oil inventories saw a bigger-than-expected drawdown in the week to June 16, reflecting some strength in U.S. crude demand.

But the API data also showed that gasoline inventories likely grew for a third straight week, indicating that U.S. fuel demand remained muted despite the onset of the travel-heavy summer season. Gasoline futures inched lower after the reading.

The API data usually heralds a similar trend in official Energy Information Administration (EIA) data due later on Thursday. Both readings were delayed this week on account of the Juneteenth holiday.

The EIA reading is expected to show a build of about 1.9 million barrels in the past week, after a bumper 7.9 million barrel build through the week to June 9. Gasoline inventories are also expected to have grown.

Now, Fed Powell’s testimony and EIA weekly Crude Oil Inventories will remain in focus today.

Technical Outlook

Crude oil witnessed more than 2.20% jump yesterday. Prices jumped to the two-week high of 5975 and settled at 5953 against its previous close of 5821.00.

On the above chart, prices are now trading on the verge of pennant resistance. A break above will lead to strong buying activities in the day to come. Further, RSI 14 and its 9 SMA are also favouring upside momentum.

Hence, traders may go long on dip around 5890-5900 Target would  be 5995-6080. Stop loss below 5815.00.

On the downside, crucial support is seen at 5755, if it breaks then prices may retreat towards 5680-5580 again.