Oil prices rocketed higher on Friday as Brent and WTI climbed nearly four percent in the New York session. Despite huge inventory drawdown data during the week, oil had continued to fall, and Friday’s price action resembled a comeback that Mohammed Ali would have been proud of. The rally was to some extent, driven by short covering in a thin market after heavy selling all week. But the primary driver appears to the news that Saudi Arabia’s crude exports have fallen to a three year low of 6.9 million barrels a day.
Along with cutting exports to the United States, the Saudi’s appear to be following their forward guidance to the letter having previously said they would cut exports to 6.6 million barrels a day by the end of August. This further cements our view that Saudi Arabia is the swing producer of last resort globally and their apparent intent has been received by markets positively.
Technically the price action has been very bullish as well with Brent spot smashing through its 200-day moving average and first support at 51.70 to close near its highs at 52.85. The next resistance is the 10th August high at 53.45 and then 54.50.
WTI spot trades slightly lower than its Friday close around 48.50 on some post weekend profit taking having broken up through its 200-day moving average at 47.75 on Friday. It still has more work to do compared to Brent with wood to chop at 49.15 ahead of its 200-day moving average at 49.25 initially. Further resistance is at seen in the 50.00/50.30 zone.