November Crude Oil futures are in a position to close the week higher. This possible reversal on the weekly chart coupled with the strong upside price action earlier in the week, suggests the market may be in a position to change the trend to up on the daily chart.
The current upside price action suggests investors may be starting to turn their backs on the bearish fundamentals. Early Wednesday, the U.S. Energy Information Administration reported that U.S. crude inventories rose 3.67 million barrels to 362.3 million the previous week. This represented the biggest increase in five months.
Furthermore, traders had priced in a drawdown of 1.0 million barrels. The news encouraged some selling pressure, but failed to challenge last week’s low at $89.56. Following the biggest jump in supply in five months, one would’ve expected much greater selling pressure. The muted reaction suggests buyers may have come in to defend against a sell-off. This may be a sign that the trend is getting ready to turn higher.
On Wednesday, September 19, the U.S. Federal Reserve issued a hawkish monetary policy statement. It was interpreted to mean the central bank is moving closer to hiking interest rates. Rising interest rates make the U.S. Dollar a more attractive investment. Since crude oil is dollar-denominated, a stronger dollar tends to hurt demand for crude oil because it makes it more expensive to foreign traders, thus curtailing demand.