Oil prices drifted slightly higher on Wednesday, after the weekly US EIA crude inventory data showed a bigger-than-anticipated drawdown. The precious liquid traded in a relatively quiet manner so far this week, despite the OPEC & non-OPEC meeting in Abu Dhabi on Monday and Tuesday. Even though members that have been overproducing in recent months reaffirmed their commitment to comply with the production numbers agreed in May, these signals probably fell short of impressing investors, evident by oil being unable to assume a clear direction in the aftermath.
Moving forward, besides the weekly inventory data, there aren't that many items on the agenda that could drive oil prices in the next days. The next OPEC & non-OPEC compliance meeting is scheduled on the 21st of August. Until then, oil's forthcoming direction may be primarily decided by movements in the US dollar. Tomorrow's US CPI data could prove critical for the currency's forthcoming direction. A rebound in US inflation could support the greenback and thereby put a lid on any near-term oil rallies.
WTI traded higher during the European morning Thursday, but it still remains within a narrow range between the support of 48.60 (S1) and the resistance of 50.35 (R1). Having in mind that the price is trading above the short-term uptrend line taken from the low of the 21st of June, and also above the upper bound of the downside channel that contained the price action from the beginnings of February until the 7th of July, we consider the short-term outlook to be cautiously positive. We expect the bulls to challenge the 50.35 (R1) line soon, where a decisive break is possible to set the stage for extensions towards the next key obstacle of 51.50 (R2).
Shifting our attention to the short-term momentum indicators, we see that both of them support the case for oil prices to continue trading higher, at least for a while. The RSI is back above 50 and is now headed towards its 70 line, while the MACD has bottomed near zero, crossed above its trigger line, and is now pointing up.
As for the broader picture, even if the price continues higher in the short run, we remain sceptical with regards to the establishment of a long-term healthy uptrend. WTI is now getting closer to the lower end of the 51.50-55.00 range, where we believe US shale producers may be attracted to increase production.