Brent crude briefly dipped to nearly one-week lows around $63 on Wednesday but managed to trim intraday losses substantially by the end of the day. Today, oil prices are back above the $64 key handle, however still struggle to challenge the 200-DMA which serves as the immediate resistance now.
The EIA report showed that crude oil inventories increased by 822,000 barrels last week while market participants expected a drawdown of 2.76 million barrels. Meanwhile, gasoline inventories rose by 5.4 million barrels and distillate stockpiles climbed by 4.1 million barrels. The bearish report fueled a local sell-off in the market but the fact that the futures managed to recover afterwards showed that traders are not ready to push Brent lower at this stage.
This in turn may signal that markets still hope for a partial trade deal between the US and China. In recent developments, there are reports that China won’t hesitate to retaliate if the United States impose the December tariffs that a due to take effect this Sunday.
In the short-term, Brent is supported by a weaker dollar as the currency came under a decent pressure following the outcome of the Federal Reserve meeting after the central bank said it won’t resume hiking rates in 2020. Still, the upside potential in the oil market is limited now as trade-related uncertainty persists.