Crude oil price paused on its downtrend in Thursday’s intraday trade after hitting a fresh three-week low earlier in the session. A weaker US dollar helped offset some losses from the previous session by rendering the commodity less expensive for buyers holding foreign currencies.
Nonetheless, it remains under selling pressure as the market digests the latest industry reports, which point to a supply-demand imbalance into the coming year. At the time of writing, WTI oil price was at $59.03. Subsequently, the USO ETF, which tracks the performance of the US oil benchmark, is testing the crucial support at $70.
Oil market reports point to growing surplus
Concerns over a supply-demand imbalance are weighing on crude oil prices, with the latest industry reports adding to the bearish investor sentiment. For instance, OPEC expects the global oil supply to slightly surplus demand in the coming year. Interestingly, this is a shift from their previous forecasts of a global supply deficit.
At the same time, the International Energy Agency (IEA) estimates that global oil supply may exceed demand by a record amount of 4 million bpd. However, it upholds oil as a strategic commodity, indicating that its demand will likely peak by 2050. This outlook is pegged on a slower adoption of electric vehicles.
Meanwhile, data from the American Petroleum Institute (API) showed a surge in inventories for the week that ended on 7th November. Crude stockpiles increased by 1.3 million barrels even as the decline in gasoline inventories pointed to a resilient US consumer.
Notably, a weaker US dollar and optimism from the IEA report helped oil prices bounce off the three-week low hit earlier on Thursday. However, both Brent and WTI benchmarks are set for their third consecutive week of losses.
USO crude oil price technical analysis
USO oil price has been range-bound for about three weeks as worries over a looming supply-demand imbalance curb its upside potential. A look at its daily chart points to further selling pressure as the bears seek to break the current support zone of $70 and retest mid-October levels of $68.50. This is after several industry reports heightened oversupply concerns.
At its current level, USO oil price is trading below the short-term 25-day EMA and the medium-term 50-day EMA. Since early October, the bearish death cross pattern has been in place; an indication that the weight on oil prices is far from over.
At its current level of $70.43, the bulls still have an opportunity to attract more buyers and defend the crucial support around $70. However, a decline past $69.45, which matches the point of convergence for the 25 and 50-day EMAs in mid-June, will give the sellers a chance to push the price lower to $68.05. On the flip side, a rebound past the 25-day EMA at $71.50 will likely activate the resistance at $72.50.
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