Following a surprise output cut by OPEC+ of 1.16M barrels per day, the Brent Crude Oil Futures (NYMEX: BB) surged 6.33% week-to-date. The crude oil prices shot up on the back of optimism coming from supply-side limitations and demand potentially outweighing supply.

According to the American Petroleum Institute (API), crude oil inventories came in significantly lower than expected, landing on negative 4.346M compared to consensus of negative 1.8M. The decline in inventories indicates buying pressure piled into the prior week, leaving the Brent Crude Oil Futures with upside traction.

Technical

Following a breakout above the descending channel pattern on the daily chart above, the Brent Crude Oil Futures entered an uptrend, with price crossing over the 100-day moving average on the hourly chart and subsequently on the daily. Support and resistance were established at the $76.93 and $86.92 per barrel (BLL) levels, respectively.

On the hourly timeframe above, the Brent Crude Oil futures are consolidating and have formed a symmetrical triangle as traders navigate through the output cut and lower inventory reading for the prior week. A breakout to either side of the pattern on high volumes could validate an extended move in the direction of the breakout.

If the price breaks above the pattern, bulls will likely aim for the $86.92 BLL level, while bears look to the $76.93 BLL level with interest if a breakout below the pattern ensues.

Summary

Key to the week’s price action will be the U.S. Services PMIs, EIA Crude Inventory count and the critical Non-Farm Payrolls. If the U.S. economy points to weakness, recessionary fears could abound and weigh down on crude oil prices, which perform better in a growing global economy. However, the Brent Crude Oil Futures will be supported by supply-side limitations, leaving the $86.92 BLL level probable.

Sources: American Petroleum Institute (API), Reuters, TradingView