Brent Oil Forecast: Short-term Outlook Constructive

Brent Oil rallied from the Wednesday's Asian session low of $55.31 to $56.09 before ending the day with marginal gains at $55.68 levels. The price action could be best described by "spinning bottom candlestick pattern".

Macro data/news

US oil inventories decreased by 6 million barrels

The Energy Information Administration [EIA's] summary of the inventory data for the weekend ending September 29, 2017 showed that commercial Crude Oil inventories in the US decreased by 6.0 million barrels from the previous week. Refineries operated at 88.1% of their operable capacity last week. Gasoline production remained virtually unchanged last week.

Record US exports wipe out OPEC output cuts

The EIA said late on Wednesday that the US Crude Oil exports jumped to 1.98 million barrels per day [bpd] last week, surpassing the 1.5 million bpd record set the previous week. What it means is that the US has wiped out nine months of OPEC output cuts in just two weeks. The 11 members of OPEC have cut their production in September by 1.041 mbpd.

Putin - Oil output cut deal could be extended to end of 2018

Russian President Putin said yesterday that his country is open to extending the output cut deal to end of 2018.

Despite record US crude exports, Brent Oil managed to hold above the Wednesday's Asian session low of $55.31. It clearly indicates that the sellers have run out of steam and that there is potential for a rally to $56.50-57.00 levels in the short-run.

Technicals

Daily chart - Spinning bottom

4-hour chart- Bullish price-RSI divergence

Bullish price-RSI divergence is likely to yield a bullish break of the triangle pattern. Prices are seen rallying to $56.09 [previous day's high] and $55.50 levels.

 

An end of the day close above the trendline sloping lower from $58.83 and $56.88 would add credence to bullish spinning bottom reversal and shall open doors for a re-test of recent highs of $58.85.