OIL: Crude Breaks Above Resistance But Outlook Pessimistic

Oil prices continued to strengthen on Thursday to be up on the week buoyed by the EIA reporting a US stock drawdown but despite the weak China PMI and stronger US dollar with the USD BBDXY up 0.3%. Technicals also supported crude but with excess supply expected in 2025, this week’s upward trend is unlikely to persist. 

• WTI rose 2% yesterday to $73.12/bbl but off the intraday high of $73.73. It broke initial resistance at $72.29 opening up $73.96. Key short-term resistance is at $76.41, October 8 high. Initial support is at $68.42, December 20 low. The benchmark is up 3.6% this week.
• Brent is up 1.7% to $75.88/bbl after a peak of $76.55 to be 2.9% higher this week. It traded above resistance at $75.43 opening up $79.50, October 7 high. However, the trend outlook remains bearish with initial support at $71.59.
• The EIA reported the sixth consecutive weekly US crude drawdown with inventories down 1.18mn barrels last week. However gasoline stocks rose 7.72mn and distillate 6.41mn with refining utilisation rising 0.2pp to 92.7%, highest since the start of December. Strategas Securities said that year end is “messy” as inventories get moved around for tax reasons.
• WTI’s prompt spread has moved further into backwardation implying a tight market in the short-term, according to Bloomberg. 

US crude stocks ex SPR