Oil retreated after testing a key technical level, but still held near a five-month high as shrinking U.S. inventories and surging Chinese imports added to signs of a tightening global market.

Fundamentals are supporting crude’s recent rally as inventories declined again last week at the key American storage hub in Cushing, Oklahoma, while weaker Russian oil exports and interrupted flows from Iraqi Kurdistan are reining in supplies.

The U.S. benchmark approached its 200-day moving average after two days of solid gains, but prices failed to break through the technical level on Thursday. Crossing that mark would be a bullish indicator with the potential to spur additional buying. If the 200-day moving average holds as resistance, prices could retreat to around US$76 a barrel, a level last seen before OPEC+ surprise output cuts, TACenergy said in a note.

A slew of reports projecting the market’s supply-and-demand projections released this week are also being closely watched. The Organization of Petroleum Exporting Countries’ report forecast that markets will be deeply undersupplied this year. In contrast, the U.S. Energy Information Administration projected supplies surpassing demand both in 2023 and 2024. The week’s third major report — from the International Energy Agency — will be published Friday.

Crude has rebounded more than 20% since hitting a 15-month low in March. In the latest sign that China’s demand is increasing, the largest crude importer shipped in the most oil in almost three years in March. Last week’s surprise production cut announcement from OPEC+ lifted prices the most in a year, punishing speculators that had bet oil prices would fall.

Prices:

• WTI for May delivery fell $1.10 to settle at $82.16 a barrel in New York.
• Brent for June settlement slid $1.24 to settle at $86.09 a barrel.