Oil: Inventory draws, flat production and risk appetite to spell WTI upside towards $41.70 – TDS

WTI has bounced back to an important technical level, the 100-DMA resistance ($39.68/bbl), following the recent petroleum Status Report statistics and positive US macro data from Wednesday morning. Bart Melek, Head of Commodity Strategy at TD Securities, expects the black gold to surge above the $41.70/bbl resistance.

Key quotes

“Following a disappointing several weeks, crude oil stocks unexpectedly started to decline at a rapid rate once again— posting a 1.98 M draw vs an expected build of 1.0 M bbls. This, along with steadfast demand and a surprisingly large distillate inventory decline of 3.2 M bbls (vs expected 1.2 M decline) suggests that the market is very likely to put to rest much of the concern that demand is going in reverse.”

“With a vaccine and effective therapeutics on the horizon, talk of a new US fiscal program and election-related uncertainties ebbing as November nears, demand growth should resume into 2021. As OPEC+ continues to give a message pointing to a steadfast commitment to rebalancing markets, the current inventory overhang will increasingly become less of a problem.”

“Considering our global supply-demand view into 2021, along with the state of inventories and US production, we expect WTI crude to shoot through resistance toward $41.70/bbl in the not too distant future.” “Longer-term, we continue to see WTI crude prices to trend in the mid-$40s/bbl in the latter part of 2020, early 2021.”