WTI pierces through $48 after data shows huge draw in US crude inventories

Crude oil rallied in the post-settlement trade on Tuesday after the API revealed that the weekly crude inventories in the U.S. dropped by 10.23 million barrels after rising 1.62 million barrels in the previous week. The barrel of West Texas Intermediate broke above the $48 mark to refresh its highest level since early June and is now trading at $48.50, up 4.6%, or $2.15, on the day.

Earlier in the day, crude oil prices gained more than 3% following a pledge by Saudi Arabia to limit its exports by nearly 1 million barrels per day next month to comply with the previously reached output cut agreement. After the meeting that took place in St. Petersburg over the weekend, OPEC called upon other members to do the same in the coming months to balance the market. Nigeria also announced that it would cap its production at 1.8 million barrels per day once it stabilizes at that level.

• Progress in St. Petersburg - BBH

This latest report is seen as another sign towards a slowdown in the U.S. shale production. In an interview with Reuters, Mark Watkins, regional investment manager at U.S. Bank, argued that the lower oil prices in June and July may have been affecting U.S. shale production. He further added, "in the U.S. investors have been waiting to see where that top is in oil production and we’ve hit a tension point."

Technical outlook

$49.15 (Jun. 1 high) could be seen as the initial hurdle for the barrel of WTI ahead of the critical $50 (psychological level) and $50.95 (Apr. 21 high). On the flip side, supports are located at $47.70 (May 31 low), $47 (psychological level) and $45.40 (Monday's low).  

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