Crude oil is crawling back towards the $90 per barrel price point, receiving a boost from yesterday’s Alaska pipeline closure. With the pipeline responsible for carrying over 15% of US output and engineers uncertain as to when production will return to normal, we may now crude oil short positions squeezed. Last week’s EIA inventory report which, whilst confirming oil stocks falling by -4.16m barrels three times analysts’ forecasts’, still showed crude oil inventories at above the upper limit of the average range for this time of year providing oil traders with a temporary block to their target of $100 per barrel.
From a technical perspective the oil market is not showing a tighter supply or demand balance. OPEC believes that supply and demand are ‘in balance,’ and expect demand growth will slow as the global economy struggles to recover, amid ample supplies. The market expects to meet price resistance above $90 per barrel as there is far more oil in storage, more fuel capacity and more idle oil wells to limit a stronger market rally in theory. The Trans-Alaskan closure will continue to squeeze the market until production clarity re-emerges