US Baker Hughes Total Rig Count is at the highest level since April 2020.
While market participants are trying to digest the FED decisions and economic data, Oil still holding its strong position and US 10-year Treasury notes are down 2.3 basis points at 1.785%. On the data front and after a strong 6.9% GDP growth in the 2021 Q4, today the Fed's favored inflation index, the core personal consumption expenditure price index (PCE), rose as it was expected at 0.5% in December, while Personal income increased just 0.3% in December, lower than 0.5% of November and expected. However, on the annual scale, the PCE increased 5.8% in December, which is the largest increase since 1982 and more than a 5.7% increase in November.
Considering all mentioned data, and while stock markets are still under pressure, trying to find the direction, WTI reached a seven-year high. The latest API and EIA data also confirmed the increasing US Oil and Gas inventories in the week ended 22. January and US Baker Hughes Total Rig Count are at the highest level since April 2020. Still, Geopolitical tensions support the Oil bulls, in line with positive GDP data.
According to the news and reports from different agencies, US President Joe Biden and his EU counterpart Ursula von der Leyen guaranteeing the energy security of Europe and Ukraine, but investors and market participants looking at the reality of Russian troops at Ukraine's border. And that was the reason to see the US Oil still holding the $86 after a quick up and down motion.
Since the market is still challenged with supply disruptions, with any simple price reduction, investors buy more. On the other hand, while next week we are waiting for the OPEC+ meeting, investors are not expecting to see any changes in the current policy of gradual increase in production.
There are two reasons to see the OPEC and allies led by Russia stick to the current plan of rising the output in March. First of all economic outlook is not clear enough, and geopolitical tensions are high. On the other hand, due to lower investments in the industry and supply chain disruptions, many members can not even fulfill their current commitments.
In the short, even though if we can see the increasing inventories and the US Baker Hughes Total Rig Count in almost two years high at 610, which can end with higher supply, still mentioned positive GDP numbers can increase the demand outlook, therefore with current supply concerns higher prices are still expected to be seen.
From the technical point of view also, as we can see in the below figure, 20 DMA at 82.24 US dollar is strong support. Increasing the OBV trend line and RSI at 69, we can see the uptrend still has more rooms. EMA crossing strategy also remains bullish.