For most of the session on Friday, the market straddled a multi-month high at $66.27 before recapturing it at the close. This level will continue to be a key pivot over the near-term.
A sustained move over $66.27 will signal the presence of buyers. Overtaking Friday’s high at $67.03 will indicate the buying is getting stronger. This could lead to a test of additional multi-month tops at $68.11 to $69.37. Gains could be capped at these levels because the market is already up over 20% since the December 16 bottom at $54.87. The size of the rally, if there is an attack, will be determined by whether it is created by a combination of both robust short-covering and aggressive speculative buying.
The odds of a rally could begin to fizzle if sellers start to press the market under $66.27. This could trigger a steep break into the uptrending support line at $64.41 on Monday.
Late Short-Covering in Brent Dragged WTI Higher into the Close
According to Reuters, it was a late-session short-covering rally in Brent crude oil that may have dragged the WTI futures contract higher into the close. Before that move, the markets were poised to finish lower for the day, suggesting traders believe President Trump’s 10-to-15-day waiting period. In the meantime, the stalemate between the two countries over nuclear weapon development continues as Trump leans on the Islamic Republic to come to terms or face an attack. Earlier in the week, Trump said that “bad things” would happen to Iran before announcing his deadline.
Falling U.S. Inventories Provide Support, but the Supply Glut Remains the Ceiling
Oil prices were also supported this week by reports of falling crude inventories and weak exports in the world’s biggest oil-producing and exporting nations. Meanwhile, the U.S. Energy Information Administration (EIA) reported a drop of 9 million barrels in U.S. stockpiles.
Nonetheless, traders can’t keep their minds off the fact that there are ample supplies and the glut could grow with OPEC+ leaning toward the resumption of oil output increases from April. Additionally, analysts at J.P. Morgan project sizeable surpluses this year, according to Reuters.
