Crude oil continues to push higher

26 мар.

Crude oil was a touch firmer this morning, as front-month WTI continues to put some blue water between itself and key support at $80 per barrel level, previously resistance. There are several factors which boost the current bullish narrative. Firstly, there are the ongoing OPEC+ production cuts, set to run until the end of the second quarter. Then there is the war between Israel and Hamas, along with the associated Houthi attacks on shipping through the Red Sea. On top of this, we have the escalation of missile attacks on energy infrastructure as Ukraine fights back against the Russian invasion. And recently, we have steeper than expected US inventory drawdowns, together with a general upgrade in expectations for future global demand growth. Any change in these factors could see them shift from being tailwinds to headwinds.

Yet a quick look at the chart of WTI shows a succession of higher lows and higher highs since the front-month contract hit a multi-month low below $68 back in mid-December. Upside momentum continues to grow and the path of least resistance points higher for now. This is not to say that we can’t experience volatility going forward. $80 is the first significant support level. But the 4-hour chart shows that the bullish trend channel would allow for a much deeper pullback to take place, while still maintaining an upside bias.