Crude Oil Forecast – U.S. Crude Pauses After Punching Above $53

Crude oil is trading sideways on Thursday. Currently, U.S. crude oil is trading at $53.37, down $0.08 or 0.16% on the day. Brent crude oil is trading at $58.88, down $0.19 or 0.35% on the day. In economic news, the Energy Information Administration (EIA) inventories report will be released at 16:00 GMT, with an estimate of a surplus of 3.3 million barrels. A surplus of this magnitude or larger will likely put downward pressure on U.S. crude.

Inventory Surplus Weighing on Crude

According to the American Petroleum Institute (API) weekly inventories report, U.S. crude stocks rose by 4.1 million barrels, above the forecast of 2.5 million. Next up is the official inventory report of the Energy Information Administration (EIA) later in the day. Last week, the EIA report surprised investors with a huge surplus of 7.5 million barrels, crushing the estimate of 3.1 million. The upcoming release is expected to show a gain of 3.3 million, another indication of a large surplus of global oil supplies, which is weighing on prices.

Fed Notes Risk of Coronavirus

The Federal Reserve minutes were released at 19:00 GMT on Wednesday. The minutes reaffirmed that Fed policymakers are cautiously confident that they can maintain current interest rate levels in 2020. At the same time, the minutes highlighted the significant risk posed by the coronavirus, stating that “the threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching.” Policymakers also said that the outbreak has dampened investor sentiment. This warning from the Fed underscores the threat that coronavirus poses to the global economy, which could well push crude prices lower in the coming weeks.

Technical Analysis

With U.S. crude gaining ground on Wednesday, the round number of 53.00 has switched to a support level. It is a weak line that could see action on Thursday. Next, there is support at 50.90, which is protecting the symbolic 50.00 level. Below, we find support at 49.30.

On the upside, there is resistance at 54.50, with the 50-day EMA situated at 54.92. A breach of this line would aim for the 200-day EMA, which is located at 56.43.

This article was originally posted on FX Empire

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