Oil is supported on demand recovery and low inventories. The sixth round of talks to restore the nuclear deal that would lift US sanctions still sees significant disagreement. If a deal is done, then expect oil weakness in the near term, However, for now, failed talks should help the oil complex stay supported despite the wider commodity rout on a hawkish Fed shift.
The price of crude oil futures extended to a cycle high of $71.24. That is the highest level since October 2018. The current price trades around $71.
The price of crude oil is up for the 3rd week in a row. The price closed around $69.40. This week, the price traded above the $70 level, but also saw moves above and below that key barometer during the week. So there has been some apprehension/anxiety.
That anxiety was shown yesterday,when the price fell sharply after reports that the US was easing sanctions on an Iran individuals. The US state department later said that the action was not reflective of overall easing of Iran sanctions but a normal review of past sanctions. As a result, the price moved back higher.
From a technical perspective, the fall yesterday stalled near the 200 hour MA (green line on the hourly chart above). Not crashing below was a bullish clue. Today, the corrective low stalled at the 100 hour MA (blue line) before moving higher, also a bullish clue.
Ultimately, it would take a move below the rising 100 hour MA at $69.80 and the 200 hour MA at $69.23 to hurt the bullish bias. Until then, the upside might have some anxious moments, but the buyers would remain in control.
The $70 level is a key psychological resistance and that is keeping a lid on the latest bullish in oil over the past two to three weeks.
Price is backing away from the figure level to $68.60 currently but it surely will not be the last time oil runs up against said resistance level over the next few months.
The upside run looks to be running into some profit-taking but in the big picture, it is tough to handicap oil market sentiment at the moment.
The Iran issue is still a wildcard but with OPEC+ playing their cards right and the virus situation improving globally across major economies, the outlook is still solid.
There are a lot of punters pinning oil for a move to $100 in the year ahead and given how things are shaping up at the moment, it isn’t too far-fetched to be honest.
Sure, there will be risk factors evolving along the way but as things stand, the fundamentals are still working in favour of oil bulls at the moment and there’s no reason to turn the other cheek just yet.
Watch out for a test of $68 as that might attract some dip buyers before the next swing region closer to the $67 level.