Crude oil prices enjoyed an impressive rally yesterday, with Brent rose most in two month. The price has edged above the $75 figure, but struggles to stay above this level on Thursday. The corrective moves look limited so far, but the retreat could deepen in the short term.
The bullish EIA report served as a catalyst for buyers as the report showed that US stockpiles declined by 5.8 million barrels last week, much more than the 1.8 drain expected. The additional buying interest came from the news that a member of International Group said the US sanctions have severely compromised its relations with Iran. Market participants took this message as another sign of the potential risks for global supply.
As the dust has settled after a short-covering rally, Brent could proceed with its bearish correction, especially if the greenback continues to regain ground across the board. Traders could opt to exit longs in the oil market ahead of Powell speech due tomorrow as the Fed Governor may express a hawkish tone and fuel dollar rally.
By Helen Rush
Senior Analyst at Capital Markets