Brent oil is back above 200-DMA, but rising US output caps gains

Brent oil recovered from the North American session low of $50.01 on the back of a weak US dollar; however, gains above the 200-DMA level of $50.76 are hard to come on account of the surging US output and the resulting glut. 

At the time of writing, Brent was trading around $50.90/barrel. The overnight recovery is largely due to the weakness in the USD. The Dollar index has shed close to 3% from its March peak. A weaker dollar makes oil cheaper in non-USD terms. 

US oil production has already risen 8.3% since mid-2016 and the rising oil rig count suggests the output may rise even further in the days ahead. What this does is overshadow efforts by OPEC and non-OPEC members to lift prices via output cuts. 

The focus today is on the American Petroleum Institute (API) weekly inventory figure. 

Brent Oil Technical Levels

A failure to hold above $50.76 (200-DMA) would open doors for a revisit to $50.01 (previous session’s low) and $49.75 (Mar 22 low). On the other hand, a break above $51.07 (previous session’s high) would expose $51.40 (Mar 15 low) and $51.83 (Mar 14 high).