Crude Breaking Out Ahead of EIA Inventories Release

Oil RallyingOil prices are trading firmly higher into the middle of the week with crude futures expanding on last week’s gains. The rally has seen futures trading higher by around 12% off the June lows. Price, crucially, is now trading above both the 72.61 level and the bear channel highs. While above this area, the outlook remains firmly bullish.USD Sell-Off Helping Lift DemandOne of the key drivers behind the rally in oil prices over the last two-weeks is the sell off we’ve seen in USD. With the market now expecting the Fed to switch back into neutral after a July hike, USD has come under heavy selling pressure. This has seen increased demand for oil and with the USD expected to fall lower near-term, oil prices should remain underpinned. Today’s US CPI print will be a key near-term driver for oil prices. If a further fall in inflation is confirmed this should see USD continue lower, allowing crude room to run higher near-term.OPEC+ Production CutsThe recent production cuts from Saudi Arabia and Russia are also having a supportive impact on oil prices. With the two producers cutting a further 1.5% of daily global supply, crude is finally seeing the upside impact that the prior voluntary cuts from Saudi Arabia alone failed to deliver.EIA Up NextLooking ahead today, traders will be watching the latest EIA inventories update. A deficit in both crude and gasoline last week helped support prices. This week, the market is looking for a further deficit which, if seen, should keep oil underpinned into the end of the week.Technical ViewsCrudeThe rally in crude prices has seen the market finally breaking out above the 72.61 level which had capped price action since early May. With price now above the bear channel highs too, we are seeing a potential trend reversal underway with 82.59 the main focus now for bulls while we hold above 72.61.