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  • EIA on Wednesday reported supplies dropping for the first time in six weeks.
  • Trade headlines have been on the brighter end of the scale.

The price of a barrel of oil climbed over 0.50% on Thursday, (WTI), travelling from a low of $55.38 to a high of $56.47 with an initial pullback supported by the 21-hour moving average.  

WTI currently trades at  $56.11 having climbed  to the highest levels in around a month on supply-side factors considering  an unexpected weekly decline in U.S. crude supplies.  Crude markets got a lift from the bullish EIA inventory data released the prior day.  

Supply vs demand funda

The EIA on Wednesday reported supplies dropping for the first time in six weeks – down 1.7 million barrels for the week ending October 18th,  something “which OPEC+ will be looking at deepening their output cuts at the December meeting, to support the Aramco IPO,” analysts at TD Securities argued –

– “We remain concerned that the Saudis may have a hard time convincing other OPEC+ members to deepen their cuts enough to balance the market. Meanwhile, near-term demand worries and seasonally building inventories will continue to place a cap on any bullish headlines,” the analysts argued, with their  comments in line with the latest data in Chinese Gross  Domestic product disappointing, as well as this week’s  US numbers in Durable Goods Orders declining for the first time in three month’s coupled with trade wars, Brexit and deteriorating European manufacturing.  

However, the latest trade headlines have been on the brighter end of the scale and should they continue to gain positive traction, as the belief grows that a potential US-Sino trade deal is in the making, along with  easing central banks, the backdrop  could be more bullish for oil prices as global downturn  is averted.  

WTI levels

Technically, the breach of the 55 handle has opened risk towards the 57 handle and the 200-day moving average (DMA) where it collides with a 38.2% Fibonacci retracement level. MACD is reaching its most recent peaks at this juncture. To the downside, the 50-DMA is located  a fraction above 55 the figure while the 21-DMA comes in at 54.50. A break below the 21-DMA opens risk towards the Nov 2018 lows at 49.39 again ahead of the 18th Dec lows down at 45.77.