Crude Back In DemandCrude traders have had a strong start to the year with crude futures trading in the green over the first full week of 2022 trading so far. On the back of hefty position reductions across the end of 2021 it seems that long positions are once again being rebuilt in crude as traders look to regain bullish momentum. Crude prices are now higher by around 30% off the Q4 2021 lows following the weakening of the US Dollar rally. The initial strength in the greenback early in Q4 struck a blow to crude upside. However, with USD bulls having lost momentum since early December, crude has been able to recover.OPEC Announce Further Production IncreasesThe big news for oil traders this week was the announcement from OPEC+ that the group will start to increase production further this year. OPEC+ and the group of non-OPEC allied nations led by Russia announced that as of February they will collectively step up oil output by a further 400k barrels per day. This marks a 100% increase on the 400k barrel per day increase announced last August.The move is well in line with OPEC’s commitment to gradually unwinding the roughly 10 million barrels per day worth of supply. Following the latest increase, the group has around 3 million barrels per day worth of supply yet to restore. According to the agreement put in place last July, production cuts need to be fully unwound by September this year.The decision to press ahead with unwinding production cuts was linked to the group’s judgement over omicron. The group decided that the variant is presents a milder and more short-lived threat than prior strains. Aside from COVID, the group was broadly positive on the economic outlook for the year ahead.EIA Reports Fresh Crude DrawdownThe EIA had good news for crude bulls this week. The group reported that in the final week of 2021, US commercial crude stores were lower by 2.1 million barrels. While this was a little less than the 3.5 million drawdown the market was looking for, it nevertheless reflected strong demand for crude into the start of 2022, enough to keep crude traders upbeat for now.Technical ViewsCrude OilThe rally off Q4 2021 lows has seen price breaking back above the rising trend line and back above several key structural levels. Price recently broke back above the 74.46 level and, with both MACD and RSI bullish, the focus is on further upside while price holds above this level. In the near term, bulls will need to see a break of the current 78.49 level resistance to open a path to 83.75 next.
Source: Tickmill
