Despite some initial setbacks, Crude Oil prices closed higher yesterday as the US weekly inventory shows an increase of over 10 million barrels.

WTI Crude Oil prices ignored the massive inventory build-up yesterday as prices turned volatile but managed to close in the Green by yesterday’s closed. For the day, WTI Crude Oil closed 2.60% higher to settle at $34.71 a barrel. The weekly Oil inventory report from the US showed an increase of 10.4 million barrels, beating estimates of 2.5 million barrels and posting the highest increase in stockpiles this year. Previously, a day before the American Petroleum Institute’s weekly inventory data showed a build-up of 9.9 million barrels, rising above the forecasts. In total, it is estimated by the EIA that there is close to 518 million barrels of Oil in commercial stockpiles, which it termed as being “historically high”.

The increase in the inventory comes as Crude Oil production last week declined 25,000 barrels per day. Oil prices reacted bearishly on the news, falling close to 2.0% but managed to reclaim and closed bullish by the day’s session.

Despite the short-term swings in Oil prices, it is expected that Crude Oil prices could resume their declines as the markets discount the talks of coordinated production freeze agreements at January levels, which incidentally happens to be a month where countries such as Saudi Arabia and Russia have peaked in their oil production.

Crude Oil Technical Analysis

The daily chart for Oil shows prices have been trending higher after testing the lows near $26.25 in mid-February. Prices have broken the trend line near the $34 handle and continue to trend steadily higher. The next main technical resistance is seen at $38, which could mark a test of the older trend line as well as a previous resistance level where prices tested the $38 handle and failed around late December last year. The candlestick patterns on the daily chart show prices closing bullish following the previous day’s doji pattern. A confirmed higher close could see prices remain poised to surge towards the $38 handle. However, there is scope for a decline back to the $34 to establish support ahead of a rally.