WTI US crude oil scorches up over 3%, touches $93 per barrel on Wednesday

• WTI is testing the $93/bbl level in Wednesday trading.
• US crude oil is getting shocked higher after a surprise drawdown in reserves.
• Supply constraints are choking oil prices, sending barrel prices surging.

West Texas Intermediary (WTI) US crude oil prices are leaping higher for the day, pushed by an unexpected drawdown in US crude reserves. WTI reached a 13-month high of $93.18 and is poised for further upside as prices bake in around $93.00.

Energy Information Administration (EIA) crude oil inventories showed a surprise drop in US crude oil reserves, with the national supply declining over 2 million barrels versus the forecast -320K. 

Reserves at the Cushing, Oklahoma oil reservoir showed declines of just below a million barrels, adding to the over 2 million barrel decline last week. 

The EIA estimates that US crude oil reserves now sit just beneath 420 million barrels.

With oil demand continuing to climb, global energy production is expected to remain below supply equilibrium for the foreseeable future until production is increased. The current daily crude supply undershoot is estimated to be around 2 million barrels.

Saudi Arabia and Russia recently announced an extension of their combined 1.3 million bpd production cuts through the end of the year, and Russia is adding to price pressures after further restricting oil exports outside of Russia.

WTI technical outlook

With WTI pinning into fresh 13-month highs, technical resistance is thinning out on both the intraday and long-term outlooks. Oil bidders will immediately be looking for a push to $94/bbl, but with US crude prices riding so high for so long an extended relief rally could see technical indicators reset before a renewed push higher.

WTI is up almost 20% from the last swing low near $78.00, and a rising trendline from June's bottoms near $68.00 is providing additional technical support.

A breakdown to the 34-day Exponential Moving Average (EMA) currently at $86.00 could see a rebound, while a successful bearish break will have to contend with the 200-day Simple Moving Average (SMA) near $77.00.

WTI daily chart

WTI technical levels