In many ways, crude oil is the most important commodity in the world. This is because over the years, it has made the world a better place. It has allowed local, regional, and intercontinental movement of people. It has helped large scale production of agricultural crops and their manufacture. It has also helped in powering the world.
For this reason, crude oil is the most consumed commodity around the world. Every day, more than 40 million barrels are produced by OPEC, Russia, and United States.
The price of crude oil depends on a number of things. First, it depends on the supply. An increase in supply tends to lead to lower prices. Second, demand also affects the movement of crude oil. When the demand increases, it leads to the increase in price. Finally, the price depends on the perception from the market about where things are. For example, if the market believes that the demand will increase, the price will move up.
The latter has happened this week. Today, China released the performance of its economy in the first quarter. The numbers showed that the economy expanded at a faster rate than what the market was expecting. The economy grew by 6.4%. As the world’s biggest consumer of crude oil, when China’s economy expands, it implies that the demand is high.
In reaction to the Chinese data, the price of crude oil jumped. It also jumped because of the inventories numbers released yesterday by the American Petroleum Institute (API). The numbers showed that inventories in the past week declined by more than 3 million barrels. This is after increasing by 4 million barrels in the previous week.
Today, traders will receive the inventory numbers released by EIA. This number tends to be more accurate than that of the API. Investors expect it to show that inventories reduced by 1.2 million barrels in the past week. This is after increasing by more than 7 million barrels in the previous week.
The price of Brent crude rose to the YTD high of $72. This was the highest level since November 2018. On the one-year chart below, the pair is trading above all the short and medium-term moving averages. The RSI has moved above the overbought level of 70 while the MACD has remained above the neutral line. The pair is likely to continue moving upwards until it tests the previous highs of 85.